The OPEC Secretariat in Vienna has sent out revised oil market projections to member states that show dire consequences unless they agree to collaborate on an unprecedented 10 million barrels per day of production cuts, Report informs referring to Energy Intelligence.
Before all OPEC meetings — and meetings of the broader OPEC-plus alliance — the secretariat normally presents OPEC members with an overview of oil market fundamentals.
Several sources told Energy Intelligence that the latest such Report — prepared ahead of a crucial OPEC-plus video conference meeting on Thursday — sets out two scenarios.
Under the first scenario — which reflects a continuation of the current state of affairs — members of the OPEC-plus alliance would no longer be bound by production constraints.
In particular, Saudi Arabia would stick with its recently implemented plans to produce around 12 million b/d — up from around 9.7 million b/d in the first quarter of this year.
Under the second scenario, OPEC members, along with Russia and other non-OPEC producers would implement joint production cuts of 10 million b/d through the end of this year.
However, the proposed seven-month duration of the proposed deal is new and could lead to further friction between the Saudis and non-OPEC Russia, which has generally favored a “wait and see” response to the pandemic.
However, these scenarios don’t reflect that Russia and Saudi Arabia reached a consensus. No final proposals have been made within OPEC+ to distribute the quotas. Sources by TASS also prove it. In addition, the partners will also determine the level to be cut, not only individual volumes.
Under the first scenario set out by the OPEC Secretariat, oil supply would exceed demand by an average of almost 14.7 million b/d in the second quarter of this year. That would overwhelm available storage capacity before the end of the quarter, forcing producers around the world to halt or “shut-in” some of their output.
The scenarios set out by the OPEC Secretariat present producers with a stark choice, sources say. OPEC sees a historically unprecedented fall of 6.8 million b/d in global oil demand for the whole of this year, with demand during the second quarter plummeting by 11.9 million b/d.
However, those numbers are considerably more bullish than other forecasts which suggest that demand could fall by 20 million b/d or even 30 million b/d during the second quarter.
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