Russia’s Energy Minister Alexander Novak is predicting a shortage in the oil market next month, Ifax reported on Thursday.
Novak said that the global oil markets could see a shortfall between three and five million barrels per day in July, depending on the outcome of the OPEC meeting that could be held yet this week.
The meeting that will help shape the future of the oil market over the next few months is proving difficult, however, even though it would appear that Saudi Arabia and Russia have reached an agreement in principle to extend the current level of cuts through the end of July.
The cuts are currently set to ease starting in July.
But negotiations among the cartel members are complex, with Iraq, Angola, Nigeria, and Kazakhstan overproducing—a bone of contention with more fastidious members such as Saudi Arabia.
OPEC+’s compliance reached 89% in May. OPEC’s second largest producer, Iraq, reached only 42% compliance, based off of preliminary data. While Saudi Arabia and Russia agreed to extend the cuts at least for another month, they are not interested in doing so unless Iraq and the other overproducers bring their production in line with the given quotas.
OPEC+ quotas call for total cuts of 9.7 million bpd. Oil demand, however, is still off by 21 million bpd as of May, according to Novak. But that’s up from 25-28 million bpd off in April.
Novak added that the filling up of oil storage has slowed, and that thanks to the current production cuts and the improving demand figures so far, the market should achieve balance in June, before slipping into a deficit in July.
Based on May’s production, OPEC has another 1 million barrels to cut to get into full compliance with the current deal.
By Julianne Geiger for Oilprice.com
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