OPEC says U.S.-led SPR oil release may swell surplus next year
OPEC expects an oil release from major consumer nations’ reserves led by the United States to swell a surplus in oil markets by 1.1 million barrels per day (bpd), a source from the group said.
The Economic Commission Board (ECB), OPEC’s economic and technical think-tank, met this week ahead of an OPEC+ ministerial meeting on Dec. 2 that is set to decide whether the producer group goes ahead with a planned output increase.
The ECB sees the oil market with a 400,000 bpd surplus in December, with the surplus expanding to 2.3 million bpd in January and 3.7 million bpd in February if consumer nations go ahead with the release, the source said on condition of anonymity.
The United States on Tuesday said it would release 50 million barrels of oil from strategic reserves in coordination with smaller releases from Britain, China, India, South Korea and Japan, to try to cool prices after OPEC+ ignored calls to pump more.
Goldman Sachs estimated the total size of the release at 70 million-80 million barrels, less than one day’s worth of global consumption, describing it as a “a drop in the ocean”.
Bloomberg News was first to report the ECB findings.
OPEC+ has resisted repeated calls from President Joe Biden’s administration to expedite its production increases as it unwinds its production cuts, which will stand at 3.8 million bpd at the end of December.
It has been increasing output targets by 400,000 bpd every month since August, saying those volumes were sufficient because it expects the oil market to be in surplus next year.
Some market analysts, including JP Morgan, have suggested OPEC could pause output increases after the release of stocks by major consumers.
OPEC+ sources told Reuters that the group has not yet started any discussions on pausing a planned output hike in January despite the SPR release.
Source: Reuters (Reporting by Ahmad Ghaddar in London; Additional reporting by Brijesh Patel in Bengaluru; Editing by David Gregorio and Barbara Lewis)