The Organization of Petroleum Exporting Countries (OPEC) monitoring committee have met virtually today, Wednesday, July 15, 2020, to assess the group’s oil production rates and make a recommendation for future production.
The current plan is for OPEC to relax its quotas slightly so that the group’s total production rises by 2 million barrels per day starting in August.
This gradual increase in production was agreed to at the group’s April meeting, and was originally supposed to take place in July.
However, in early June, OPEC and Russia agreed to delay the production increase until August due to lagging demand.
However, not all of OPEC producers will be increasing production come August. Iraq, Nigeria and Angola have all committed to continuing to keep oil production lower for several more months, because these countries did not cut their production sufficiently in May and June.
Saudi Arabia has been very concerned with pressuring these countries to adhere to their production cuts and has made a public show of securing statements, especially from Iraq, about their continued commitments to fulfilling their obligations under the OPEC agreement.
However, Saudi Arabia’s Aramco CEO, Amin Nasser, believes that the real problem isn’t supply but that of demand and that OPEC may be too optimistic about the world’s ability to consume more oil.
On July 1, he said that China’s gasoline and diesel demand has returned to pre-coronavirus lockdown levels and predicted that demand elsewhere would continue to rise, as ‘more countries will start opening up.’
However, oil demand elsewhere is not showing a stable or consistent recovery. Even though many parts of the United States have relaxed lockdowns, gasoline demand remains far below typical levels for this time of year and in weekly deliveries has not shown a consistent trend upwards.