We are excited to announce that as of February 1, Wood Mackenzie is a portfolio company of Veritas Capital, a leading investor at the intersection of technology and government. Our focus remains on providing you with the best intelligence, analytics, data and tools to ensure you are making the best data-driven business decisions with confidence.  

Read more in our news release here. 


OPEC+ surprises market as it extends output curbs

1 minute read

Ann-Louise Hittle, vice president, Macro Oils, at global natural resources consultancy Wood Mackenzie, said: “OPEC+ took the market by surprise today when it decided to roll over its quota, saying that rather than anticipate a demand recovery, the group would wait to see it actually recover.

“The market was expecting a substantial increase in production because a tightening in the supply and demand balance is already evident.”

She added: “Oil prices have increased strongly in the last two months, with Brent hitting $65-$66 per barrel. Prices are rising in anticipation of a recovery in demand and limited supply growth for 2021.”

Wood Mackenzie is forecasting global stock draws for the second to fourth quarters this year. That was before OPEC+ agreed to roll over its current production restraint, with only Russia and Kazakhstan allowed small increases. Saudi Arabia is keeping its voluntary additional cut of 1 million barrels per day (b/d) – announced in January and originally due to lift at the end of this month – in place for April.

Hittle said: “Clearly OPEC+ has decided to take a cautious approach to demand recovery. However, waiting for a solid sign of strong stock draws means prices will have already increased from the present level by the time that sign emerges. 

“Stocks are a lagging indicator and already the market can see solid signals of demand strength – the vaccination programme in the US, the world’s largest consumer, is ramping up, with the Biden administration promising enough for every adult by end-May. This should help spur a recovery.”

Wood Mackenzie forecasts global demand will increase 6.3 million b/d year on year in 2021. If OPEC+ does not increase output in April, except the small amounts for Russia and Kazakhstan, the stock draw will be significantly more than 1 million b/d next month, as the summer demand season looms. We expect oil prices to rise toward $70-$75 per barrel during April. 

Hittle added: “The risk is these higher prices will dampen the tentative global recovery. But the Saudi Energy Minister, Prince Abdulaziz, is adamant OPEC+ must watch for concrete signs of a demand rise before he moves on production.  

“When compared against last year’s collapse, we expect a strong recovery in oil demand for Q2 2021, of nearly 14 million b/d year-on-year after a subdued gain of 0.8 million b/d in the first quarter for Q2 2021.  With OPEC+ production restraint in place during April, as demand surges, upward pressure on prices is likely to continue.

“By comparison to the 6.3 million b/d increase in demand this year, we forecast global supply to rise much less, at 1.5 million b/d. On this basis, the market is slipping into a period of sustained stock draw for the rest of the year.”

Related content