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OPEC may adjust production in response to reserve releases

Bloomberg reports that at its next meeting, OPEC and its allies may choose to hold back in unwinding its longstanding production quotas to compensate for coordinated releases from strategic oil reserves.

The recent rise in oil prices has helped improve the situation for the oil and gas industry, which was greatly impacted by falling demand in the wake of the COVID-19 pandemic. Indeed, oil and lubricant companies like BP, Shell and Exxon Mobil have generally posted good results this year, but some fear that high energy prices could hinder the post-pandemic economic recovery.

The US has therefore encouraged other oil-consuming countries to take part in a coordinate release of strategic oil reserves to increase supply. China and Japan appear to be on board so far, with India also now considering the move. This would, however, conflict with the views of OPEC, which sees no need to increase supply beyond what is currently planned.

In a statement, the International Energy Forum’s Secretary-General, Joseph McMonigle, at first suggested that OPEC+ would likely stick to its current plans:

“I anticipate OPEC+ energy ministers will maintain their current plan of adding more supplies to the market gradually.”

Following a meeting with a Japanese official from the foreign ministry, however, his view seemed to have changed, saying:

“However, certain unforeseen external factors such as a release of strategic reserves or new lockdowns in Europe may prompt a reassessment of market conditions.”

The OPEC+ group will meet next in early December and decide whether to revise the planned production increase of 400,000 barrels per day for January next year.

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