Alexander Novak, Russia’s Energy Minister and Deputy Prime Minister, has stated he sees a one million barrel per day (bpd) gap between oil demand and supply.
Currently, the OPEC+ group is due to begin relaxing its production cuts through July by 2.1 million bpd, but this may change at its next meeting.
One factor in the group’s deliberations will be the possible return of Iran to the global oil market. Washington and Tehran are said to be in indirect talks about Iran’s nuclear programme, and this may possibly lead to sanctions being lifted. If so, this could add between one to two million bpd to the total production of OPEC+.
Novak told reporters about this:
“We have always kept in mind a return of Iranian barrels. We need to consider this…We will jointly calculate the (supply and demand) balance.”
Brent prices dropped slightly on Wednesday, May 26 in the wake of news about a possible deal that would allow Iran to resume oil production, but the outlook still looks reasonably bright for oil and lubricant producers like Exxon Mobil and Total. Commerzbank pointed out the declining COVID-19 case numbers in India and the relaxing of restrictions elsewhere in the world, saying in a note:
“OPEC+ is likely to step up its production…from May to July, yet this will presumably happen in line with the recovery of demand.”
Citi also said it expected that strong demand in the summer would keep the markets sufficiently tight to justify oil prices in the mid-$70 range.