“OPEC”: The withdrawal of oil stocks may lead to an oversupply

The Organization of “OPEC” expects a surplus in the global oil market due to the withdrawal of a number of major countries from oil stocks, following the invitation of US President Joe Biden to do so.

  • “OPEC” expects a significant increase in the global oil surplus

A source in “OPEC” said that the organization expects that the move by major consumers to withdraw from oil stocks will lead to a significant increase in the global surplus, in the next few months, about a week before a meeting to decide on production policy.

This could complicate decision-making in the Organization of the Petroleum Exporting Countries and its allies, the cartel known as “OPEC +”, although several sources said there had been no discussion so far about halting the planned production increases.

The Council of the OPEC Economic Committee, a team of experts that advises ministers, met this week, ahead of the December 2 OPEC+ ministerial meeting.

An OPEC source, who asked not to be named, said that the council expects the withdrawal of oil stocks to increase the surplus in the global market by 1.1 million barrels per day. In the past few days, “OPEC” warned of an expected oversupply in 2021.

The source stated that the council expects a surplus of 400,000 barrels per day in December, up to 2.3 million barrels per day in January, and 3.7 million in February, if the consuming countries go ahead with withdrawals.

On Tuesday, the United States said it It will withdraw 50 million barrels of oil of strategic reserves In coordination with similar operations in China And India, South Korea, Japan and Britain, in an attempt to calm prices after “OPEC +” ignored calls to pump more crude.

Biden, who is suffering from low popularity ahead of next year’s congressional elections, was disappointed after “OPEC +” ignored his repeated requests to pump more oil. US retail gasoline prices rose more than 60% last year, the fastest rate of increase since 2000.

Goldman Sachs estimated the total volume of withdrawals at 70 million to 80 million barrels, which is less than the volume of global consumption in one day, and described this as a “drop in the ocean.”

And “OPEC +” has resisted Washington’s calls to do more as it gradually rolls back production cuts that will amount to 3.8 million barrels per day at the end of December.

The organization worked on Increased production target by 400,000 barrels per day every month since August, saying that these quantities are sufficient due to the expected surplus in the oil market over the next year.

Some market analysts, including JP Morgan, have indicated that OPEC may pause production increases after the withdrawal of oil stocks by major consumers.

Sources in “OPEC +” told “Reuters” that the organization has not yet started any discussions about stopping a planned increase in production in January, while the Iraqi Oil Minister said, today, Thursday, that “OPEC +” must adhere to its current plan.

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