Lockdown has eased in many countries of the world. Transportation has resumed. International flights also launch. OPEC is going to increase the supply of oil as the demand for fuel oil increases.
Due to the increase in demand for fuel oil from last month to this month, the world’s top oil producers want to increase the supply of oil. The supply increase is expected to be announced this week.
OPEC an alliance of oil producers and exporters will hold a meeting on Tuesday and Wednesday to discuss its next steps. Analysts believe that the big producers decided to cut supply in April to raise prices, will agree to change that. It is expected that daily oil production will be reduced to 7.7 million barrels from next month. That is, production will increase by 2 million barrels.
In April, comprising OPEC members and Russia agreed to cut oil production by 9.7 million barrels per day due to declining demand due to the coronavirus pandemic. The OPEC alliance agreed to reduce oil production in May and June in order to raise prices and reduce reserves. Gradually this amount OPEC will be reduced. That means production will be reduced by 8 million barrels from July to December. Later, from January 2021 to April 2022, the daily reduction will be 6 million barrels.
Since the beginning of this year, the price of crude oil in the world market has dropped by about 30 percent. Trade West Texas Intermediate (WTI) in the United States was fell below per barrel “zero dollars” in the third week in April.
At that time the price of this oil was -$37.63. This means that the producers were willing to pay the buyer the same amount of oil per barrel. This situation was created due to the fear that there would be no more space for oil storage in May due to the lack of demand and continued production.
Last week, the International Atomic Energy Agency (IAEA) said the worst effects of the coronavirus lockdown had been reversed. The IEA, in its monthly report, has forecast some improvement in global demand for crude oil this year. However, it has been warned that much depends on the direction of the epidemic.
The IAEA report further states, Outbreaks of coronavirus infection have re-emerged in several countries around the world, including the United States and Latin America. This is a bit of a threat to the growth of demand. The increase in coronavirus infection and the introduction of partial lockdown are exacerbating this uncertainty.