OPEC+ – 01 July 2021

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OPEC+ discussed a potential roll back in current cuts for about 500,000 barrels a day. The organisation has delayed preparatory talks between ministers by a day to give more time for compromise before a critical meeting.
All the focus this week will therefore be on OPEC+. With the group meeting on Thursday to discuss production policy, and in particular to decide on supply in August given the strength of the market and concerns about tightness. It is expected that OPEC+ will increase supply and our expectation is that the group will agree an increase of 500,000 barrels per day for August between now and Thursday there will be a lot of noise about what the group might decide.
The alliance, led by Saudi Arabia and Russia, is considering whether to continue to revive more crude supplies. This move could ease upward pressure on prices as global demand rebounds from the coronavirus pandemic.
Analysts believe that, as oil prices have risen to their highest level in about two and a half years, OPEC+ will draw on some of the vast capacity it closed last year. The average expectation of analysts is for an increase of 550,000 barrels a day – about 10% of the volume that remains unused.
Main markets, in particular the US and China, are seeing stable increase in demand as recovery from the pandemic gains momentum.
OPEC+ stated that given current production levels, the market will be in deficit making the case for a reduction in current cuts levels.
Brent crude jumped 1.34 percent to $75.62 a barrel at 9:30 a.m. in London. With the overall benchmark  down this week amid growing concern about a more contagious variant of the virus, it is still up about 45% this year. Inflation fears have been boosted by rising prices, part of a broader rally in commodities.

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