As economies recover from the pandemic, the Organization of Petroleum Exporting Countries (OPEC) anticipates an oil supply deficit in August and the rest of 2021, suggesting the organization and its allies have room to expand their output at a meeting this week, according to Reuters.
From May through July, OPEC and its allies, named OPEC+, will return 2.1 million barrels per day (bpd), or approximately 2% of global output, to the market as part of a plan to reduce last year’s record output limitations.
On Thursday, OPEC+ will meet to discuss supplies for the coming months. With oil at its highest since 2018, a further increase in August will be discussed; however, some producers are concerned about additional demand setbacks and increased Iranian supply.
According to OPEC’s newest demand prediction, assuming output levels remain unchanged, OPEC supply will fall short of the expected demand of 1.5 million bpd in August. In the fourth quarter, the shortage grows to 2.2 million bpd.
Iran and foreign countries have been discussing renewing the 2015 nuclear deal since April and this would allow Iran to increase output, but have yet to reach an agreement.
According to OPEC numbers, Tehran pumped 2.5 million bpd in May and 3.8 million bpd in 2018 before the US tightened sanctions. Therefore, if Iran adds 1.3 million bpd in the coming months, OPEC+ will have less room to raise supply without pushing the market into surplus.
When the pandemic first hit, demand dropped, and OPEC+ dropped supply by a record 9.7 million bpd. The existing limitations will be set at 5.8 million bpd by July.