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Global oil stocks are set to rise faster than previously expected, according to an internal report prepared for the technical committee meeting of the OPEC+ group seen by Energy Intelligence.
The report, prepared for the meeting of the Joint Technical Committee (JTC)—expected on Wednesday—shows that OPEC+ expects global oil supply to exceed demand by as much as 3 million barrels per day (bpd) during the first quarter of next year, according to the document seen by Energy Intelligence.
The report analyzed oil market conditions before the Friday plunge in oil prices as a reaction to the Omicron variant, which sent Brent Crude down to the low $70s and WTI Crude below $70 per barrel.
Under the base-case scenario in the OPEC+ assessment, oil supply is set to exceed demand by 1.8 million bpd for the whole of 2022. This assessment includes OPEC+ increasing production by 400,000 bpd each month until September 2022 and the release of a total of 70 million of crude from strategic stockpiles in the first quarter of 2022, including the 50 million release from the U.S. Strategic Petroleum Reserve (SPR).
While the implied global stock drawdowns in 2021 are estimated at a total of 442 million barrels, next year will see an implied stock build of 639 million barrels, according to the OPEC+ estimate seen by Energy Intelligence.
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The expected oversupply on the market as early as in Q1 2022 is yet another reason that the OPEC+ group could use to pause the monthly supply addition of 400,000 bpd when it meets on Thursday, December 2, to discuss January production levels.
The JTC meeting was already postponed from Monday to Wednesday, December 1, in order to give the group’s technical and monitoring panels and OPEC+ experts more time to study the potential impact of the Omicron COVID variant on oil demand.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.