Oil Market Seeing Concerns About Demand Recovery

The crude oil market is seeing rising concerns about the recovery of global demand amid another wave of the Coronavirus pandemic.

A summit for the Organization of the Petroleum Exporting Countries (OPEC) and other major producers led by Russia, an alliance known as OPEC+ is discussing output policy for the coming month.

Saudi Arabia has reportedly warned leading producers against raising production, noting that the new Coronavirus variant is worrying and unpredictable, the Financial Times reported.

The kingdom has openly supported maintaining output curbs to help restore market balance amid the pandemic.

According to Saudi officials, raising production imposes a risk on market recovery even if there could be small short-term gains.

Meanwhile, Russia is thought to be a supporter of raising output to protect its market share, viewing the move as a step to accelerate and pave the way of production recovery to pre-crisis levels.

Last month OPEC+ increased production by 500,000 barrels per day (b/d), an increase that was well below the expected 2 million b/d rise.

The outlook for the first half (H1) of 2021 is very mixed, according to the Secretary-General of OPEC, Mohammed Sanusi Barkindo, who was quoted by Bloomberg as saying that “there are still many downside risks to juggle.”

Two forces are moving the market, which puts pressure on the OPEC+ alliance. On one hand, the rollout of vaccines is helping improve the demand outlook, while the new variant and the rising number of cases amid a new wave that prompted renewed lockdown measures are making for a more gloomy outlook.