Oversupply Is a Thing of the Past

Oversupply is a thing of the past as long as OPEC+ compliance stays strong and the oil demand recovery trajectory isn’t radically altered.

That’s according to Rystad Energy, which made the comment in a statement sent to Rigzone on June 8. The company outlined that the last surplus month appears to have been May, when crude and condensate production exceeded demand by about 6.1 million barrels per day (MMbpd). June is now already set for a global production deficit of about 1.5MMbpd, Rystad Energy highlighted.

The deficit is forecasted to reach 4.6MMbpd in July, 4.2MMbpd in August and, after being reduced a little during the remainder of 2020, peak at 5.2MMbpd in January 2021. Although the shortfall will ease after that, Rystad Energy estimates that monthly deficits will remain throughout 2021.

“We believe OPEC+ is attempting to create a mini-bull-cycle by quickly tightening the prompt market, helping depressed prices and creating a supply environment that will facilitate a rapid relief of oil storages, as deficits will trigger large stock draws,” Rystad Energy’s Head of Oil Markets Bjornar Tonhaugen, said in a statement sent to Rigzone on Monday.

“However, if the oil price continues its steady ascension, this will spur reactivation of parts of the curtailed U.S. oil production. Also, if frac crews end their holidays early, U.S. volumes may be coming back more quickly than OPEC+ expects, bridging part of the deficit,” he added in the statement.

Last month, Tonhaugen outlined that the oil market had escaped a collapse following a 16MMbpd oversupply during April.

Rystad Energy describes itself as an independent energy research and business intelligence company which provides data, analytics and consultancy services to clients exposed to the energy industry across the globe. The business is headquartered in Oslo, Norway, and has several other locations around the world.

To contact the author, email andreas.exarheas@rigzone.com