OPEC+ JTC sees oil stocks continuing to fall, but flags concerns on Delta variant

Quantum Commodity Intelligence – The OPEC+ producer group's Joint Technical Committee (JTC) remains broadly positive on market outlook, as the group prepares to meet on Thursday to discuss proposals to increase production to counter soaring oil pricing.

The JTC sees OECD inventories potentially falling 100 million barrels below the 2015-2019 average by end-year, but cautioned on the spread of the Covid-19 Delta variant and the uneven pace of vaccine rollouts.

OECD industry stocks held relatively steady in April, at 2 926 million barrels, but fell 1.6 million barrels below the pre-Covid 2015 to 2019 average for the first time in more than a year, the International Energy Agency said in June. 

Speaking after the JTC meeting, OPEC secretary general Mohammad Barkindo said, "the overall brighter picture in relation to the pandemic recovery efforts has led to significantly improved oil market conditions and prospects for future growth."

In its June's edition, OPEC's Monthly Oil Market Report projected global oil demand to rise by 6 million bpd in 2021, while world economic growth is forecast at a rate of 5.5% in the same period.

The JTC report identified positive signs of demand growth in the Americas, plus higher calls for gasoline, diesel and jet fuel in Europe, where "oil demand is projected to show healthy performance."

But given the uncertainty over the demand recovery, OPEC+ is expected to err on the side of caution and raise August production by a modest 500,000 bpd.

Daniel Hynes, senior commodity strategist at ANZ said, "the JTC met, with the focus on the market post the peak summer demand period. There was some concern that as holiday travel receded, the overall oil market could return to oversupply amid rising cases of the delta variant of the coronavirus."