Energy ministers from OPEC+, the oil alliance led by Saudi Arabia and Russia, are preparing for a crucial meeting on Thursday amid signs that the recovery in global oil markets is slowing down because of a resurgence in the COVID-19 pandemic.
Projections for 2020 crude demand have been downgraded in the past couple of days by two authoritative sources — the Organization of Petroleum Exporting Countries (OPEC) itself, and the International Energy Agency (IEA).
In addition to new COVID lockdowns, the IEA blamed teleworking and weak air travel for the downturn in crude demand in “even more fragile” markets.
Brent crude, the global benchmark, has lost about 10 per cent in the past two weeks but has mostly stayed above the $40 per barrel level.
According to OPEC sources, ministers are considering whether to take further proactive measures now on oil supply to head off a possible excess this autumn, or to stick with the regime of cuts, compliance and compensation that has brought oil supply closer to rebalance.
The price of crude has more than doubled since the market chaos of April before the current OPEC+ regime took effect.
Traders were spooked by figures this week that showed the UAE, one of the staunchest advocates of the compliance policy, missed the OPEC+ targets by a wide margin.
Abu Dhabi said the lapse was temporary because of increased domestic seasonal demand, and promised to compensate next month. Overall compliance with the cuts has been unprecedented.
Energy analyst Robin Mills, chief executive of Qamar Energy consultancy, said he believed OPEC+ would “hold the line” at the current level of cuts.