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Opec took enough action for market stability: UAE

Goldman Sachs sounds bullish on oil outlook

The Opec+ bloc is taking adequate measures for the stability of the oil market, the UAE Energy Minister Suhail Al Mazrouei said in India as market analysts argued that voluntary oil production cuts by oil exporting countries might keep crude oil prices elevated and impact demand.

“I believe what we are doing in Opec+ is adequate and we are addressing that (demand and supply). We are doing this on behalf of all producers around the world and for the benefit of balancing demand and supply for all the consumers as well,” Al Mazrouei said at a meeting in India of energy ministers of the Group of 20 nations in Goa. The UAE minister said he was not worried about oil demand and described limited investment as the biggest challenge.

Al Mazrouei’s remarks came as Goldman Sachs estimated that record demand in oil markets to drive crude prices higher in the near term. “We expect pretty sizable deficits in the second half with deficits of almost 2 million barrels per day in the third quarter as demand reaches an all-time high,” Goldman’s head of oil research Daan Struyven told CNBC. The bank forecasts Brent crude to rise from just above $80 per barrel now to $86 per barrel by year-end.

Saudi Arabia has implemented an additional production cut of one million barrels per day (bpd) from July 2023. In May, the Opec+, which pumps 40 per cent of the world’s crude oil, had cut oil production by 1.6 million bpd for 2023.

In the May cuts, Saudi Arabia had reduced supply by 500,000 bpd, while Iraq had cut over 200,000 bpd until the end of the year. Russia, which is part of Opec+, had announced an extension of its production cut of 50,000 bpd till the end of 2023.

Oil prices have found some support from evidence of tightening supplies and economic stimulus in slow-recovering China, with Brent crude trading above $80 a barrel, up from near $71 in late June.

The next Opec+ policy meeting is not until November, although a panel of key ministers, the Joint Ministerial Monitoring Committee, holds an online meeting on August 4 to review the market.

Secretary General of the International Energy Forum Joseph McMonigle had forecast that both India and China will make up 2.0 million barrels a day of demand pick-up in the second half of 2023.

Goldman Sachs’ Struyven suggested that the lack of an agreement following the G20 energy ministers’ meeting indicates very substantial uncertainty about long-run oil demand.

The Group of 20 energy ministers met in India over the weekend but left without reaching a consensus on the phasing down of fossil fuels, complicating the transition toward clean energy.

“Key point here for investors is, with the uncertainty about oil demand being so elevated, investors may require a premium to compensate for the elevated risk from such elevated demand uncertainty,” Struyven said.