New Delhi: Goldman Sachs Commodities Research said more oil production is needed from the Organization of the Petroleum Exporting Countries and allies (OPEC+) to balance the market by 2022 as supply risk looms elsewhere.
The U.S. bank forecast oil demand to rise by an additional 2.2 million barrels per day (mbpd) by year-end, leaving a 5 mbpd supply shortfall, well in excess of what Iran and shale producers can bring online, it said in a note dated June 29.
“While a large new infection wave could slow the market rebalancing, we expect OPEC+ to remain tactical in its output hikes with downside risks to global supply elsewhere pointing to a more robust outlook for crude and the upstream sector than petroleum products and the downstream sector,” Goldman said.
The bank sees a base case of 0.5 mbpd supply increase from OPEC+ producers for consecutive months, when the group meets on July 1 to discuss the threat of the Delta COVID variant, the potential return of Iran production and still slow shale response.
The Delta variant of the coronavirus is more infectious and is likely to gain more traction over other variants.
However, boosting broad recovery hopes, Mohammad Barkindo, Secretary-General of OPEC said on Tuesday that demand is expected to rise by 6 mbpd in 2021, with 5 mbpd of that in the second half of the year.
Meanwhile, negotiations to revive the Iran nuclear deal paused this month after hardline judge Ebrahim Raisi won the country’s presidential election.
A deal could lead to Iran exporting an extra 1 million bpd, or 1% of global supply, for more than six months from its storage facilities.
News source- Economic Times