By Adedapo Adesanya
The Brent crude oil reached the $70 a barrel threshold on Tuesday after the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) forecast a tightening global market ahead of a production policy meeting.
The crude benchmark, which major countries, including Nigeria, price their crude, rose by 73 cents or 1.34 per cent to $70.25 per barrel while the US West Texas Intermediate (WTI) crude went up by 15 cents or 0.22 per cent to $67.87 per barrel.
OPEC+ officials had a virtual meeting on Tuesday and reaffirmed their current plans to gradually increase production in July.
The oil-producing alliance will boost output in July, in accordance with the group’s April decision to return 2.1 million barrels per day to the market between May and July.
This is coming after the Joint Technical Committee (JTC) of the OPEC+ group maintained at a meeting on Monday its outlook for global oil demand growth at around 6 million barrels per day this year.
The oil glut built up during the pandemic has almost gone and stockpiles will slide rapidly in the second half of the year, according to an assessment of the market from the committee.
At the meeting, the production policy beyond July was not decided and the group will meet again on July 1.
Even with Brent at the $70 marker, some analysts see more room for demand outperforming supply with projections of 650,000 barrels per day and 950,000 barrels per day in the third and fourth quarters respectively.
Also giving the market a boost is a robust recovery in the US and Europe, with vaccination efforts and the summer driving season coupled with reopening of the economies.
The market looks assured that the prospect of more supply from Iran, should a nuclear deal be revived, can be absorbed. With improving demand, what could be an additional 2 million barrels a day from Iran, if it materializes, may have no much effect in the long run.
OPEC sees this as no threat as its Secretary-General, Mr Mohammad Barkindo, said that the Middle East country’s comeback will occur in an orderly and transparent fashion, therefore, causing no upset to the stability that other OPEC+ nations have worked hard to achieve.
Meanwhile, Asian refiners are struggling with a major slump in profit margins because of the resurgence in COVID-19 infections in the region, as the latest trends in complex refining margins show in Singapore.
