OPEC and its allies have achieved the oil-market equivalent of a high-wire act: increasing supply even as demand remains depleted, without crashing prices.
Whether they can successfully continue the balancing act is unclear.
The coalition of producers led by Saudi Arabia and Russia is restoring some of the vast quantities of crude halted during the depths of the coronavirus crisis. So far the supply boost hasn’t derailed oil’s fragile recovery, which has seen prices climb to a five-month high.
But the outlook for fuel demand has deteriorated as the pandemic crushes international travel, and new outbreaks of the disease are weighing on the economic recovery. On Wednesday, key OPEC+ members will meet to consider how to safe-guard their recent success.
“They need to be very vigilant,” said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. “Because you can get a demand pullback, and they just need to be very quick in responding.”
The Organization of Petroleum Exporting Countries and its partners slashed 9.7 million barrels of daily output earlier this year — about 10% of global supply — when global lockdowns inflicted the biggest oil-demand collapse in history.
Their sacrifices paid off, turning around a market that at its trough saw prices in New York crash below zero. Brent crude futures are trading near $45 a barrel, triple the levels of late April. The effort has thrown a lifeline not only to the economies of OPEC+ members, but international companies like BP Plc and Exxon Mobil Corp.
With global consumption creeping back up toward normal levels, OPEC+ has this month started to carefully open the taps.