Global markets have been soaking up the additional barrels OPEC+ has been producing since the spring without inventory builds, suggesting that the market needed the higher supply, according to Suhail al-Mazrouei, the energy minister of one of OPEC’s top producers, the United Arab Emirates (UAE).
“You can see that even with the increases for several months we haven’t seen a major buildup in inventories, which means the market needed those barrels,” al-Mazrouei said on Wednesday, as carried by Reuters.
This past weekend, the OPEC+ producers that have been cutting production for three years, including the UAE, decided to boost oil production for August by a bigger-than-expected chunk of 548,000 barrels per day (bpd), up from 411,000 bpd for each of the previous three months.
Market participants were caught by surprise by the larger hike, and analysts expect inventory builds and lower oil prices after peak summer demand begins to wane in the autumn.
The OPEC+ group motivated its decision for the supersized hike with “a steady global economic outlook and current healthy market fundamentals, as reflected in the low oil inventories.”
These producers are taking advantage of stronger demand during the peak summer travel period in the northern hemisphere to unwind most production cuts.
The eight OPEC+ members that are unwinding the cuts are expected to announce another supersized increase for September when they meet in early August. With the September hike, the 2.2 million bpd cuts will all be back on the market, at least the headline figures suggest so.
Another production boost of 550,000 bpd for September would allow OPEC+ to unwind all the 2.2 million bpd cuts, as well as complete the 300,000 bpd output increase from the UAE as the Gulf producer last year argued for and received a higher quota due to the ramp-up of its production capacity.
By Tsvetana Paraskova for Oilprice.com
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