The 411,000 barrels daily that OPEC+ said it would add to oil production in May have not materialized, commodity analysts from Morgan Stanley said.
“Notwithstanding the around 1 million-barrel-a-day increase in production quotas between March and June, an actual increase in production is hard to detect,” the team, led by Martijn Rats said in a note today, as quoted by Bloomberg. “Notably, it does not appear that production in Saudi Arabia has ramped up significantly,” the note also said.
The data Morgan Stanley used to see if there was an actual increase in production included refinery flows, exports, pipeline flows, and inventory change information. Still, the bank believes that OPEC+ would add some 420,000 barrels daily to its crude production in the months between June and September, tipping the market into a surplus.
The surplus situation will be additionally fueled by production growth outside OPEC+, which Morgan Stanley sees at 1.1 million barrels daily, compared with estimated demand growth of just 800,000 barrels daily.
OPEC+ shocked many earlier this year when it said it was going to start returning supply to market at a higher rate than originally expected. Said rate, at 411,000 barrels daily, was seen as bringing about a surplus sooner than, again, many in the oil market expected. Some observers noted, however, that not all OPEC+ members that took part in the supply curbs would be either able or willing to boost their production by the desired rate, which the Morgan Stanley data suggests may indeed be the case.
Oil prices, meanwhile, remain elevated, with Brent crude climbing above $66 per barrel to trade at $66.40 at the time of writing, and West Texas Intermediate moving closer to $65, to trade at $64.52 per barrel at the time of writing. The climb is seen as evidence of hope the United States and China would be able to come to some form of agreement on trade.
By Irina Slav for Oilprice.com
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