OPEC+ JTC AMD JMMC MEETING 02/02/2021-02/03/2021

Feb 2, 2021

Thomas Thornton

Yes, it is that time again, another OPEC plus meeting. After all the big changes last meeting, I believe that they will stay the course with no additional changes.

Notable items from today’s meeting via Energy Intelligence:

According to OPEC’s base case scenario: OECD commercial stocks standing at 100 mb above the latest five-year average at the end of March 2021 before dropping slightly below the latest five year average as of June 2021.

Based on OPEC’s Alternative Scenario : OECD commercial stocks standing at 115 mb above the latest five-year average at the end of March 2021 and remain higher throughout 2021

In 2020, world oil demand is estimated to have decreased by 9.72 million bpd and is expected to increase by 5.60 million bpd in 2021.

UnderOPEC’s base case global oil demand is expected to be 97.9 million bpd in 2021 and under their alternative scenario its 96.9 million bpd for the year.

In December: Total production by all of the OPEC+ states was higher by 72,000 bpd than the required cuts

Countries that have overproduced and have NOT submitted an updated compensation cuts plan to the opec secretariat are: Congo, Gabon, Brunei, Kazakhstan, Russia, Sudan and South Sudan.

The worst OPEC+ member state when it comes to overall compliance in 2020 is South Sudan (it is usually Iraq).

This is all very positive for the market, and crude is reacting in kind making new highs this morning.

UBS noted today:

“Crude oil is likely to be a key beneficiary of increased mobility.
Once a critical mass of the population is vaccinated this year,
we think oil demand will rise further.
With oil demand climbing toward 100mbpd in 2H21, and
with OPEC+ still trying to limit supply, we expect Brent to
trade at USD 63/bbl in 2H21 and USD 65/bbl in 1Q22.”

In sum, they expect the oil market to be undersupplied by 1.5mbpd
this year.

All of this is very positive for for oil equities from downstream, midstream, and upstream.