OPEC, non-OPEC to bring back 5.8 million barrel/day production by Sept. 2022; InterPipeline, Pembina shareholders set to vote on merger

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OPEC, non-OPEC to bring back 5.8 million barrel/day production by Sept. 2022

The organization of Petroleum Exporting Countries (OPEC) and non-OPEC delegates agreed on July 18 to reaffirm a program of gradual production increases until the market sees a full return of the 5.8 million barrel/day capacity pulled back by the cartel in a bid to support crude oil prices.

Members agreed on a plan to increase production by 400,000 barrels per day, on a monthly basis, until fully phasing out a 5.8 million barrels per day production readjustment by September 2022.

“The (19th) Meeting noted the ongoing strengthening of market fundamentals, with oil demand showing clear signs of improvement,” the Vienna-based organization reported.

“The Meeting welcomed the positive performance of Participating Countries in the Declaration of Cooperation. Overall conformity to the production adjustments was 113% in June, including Mexico,” it said.

Delegates decided to “extend the decision of the 10th OPEC and non-OPEC Ministerial Meeting (April 2020) until the 31st of December 2022,” it said. Members will re-evaluate at that time.  

The aim is “to end production adjustments by the end of September 2022, subject to market conditions.”  OPEC announced it will hold the 20th OPEC and non-OPEC Ministerial Meeting on Sept. 1.

OPEC and non-OPEC countries have been coordinating in the past actions to join efforts to reduce crude oil supplies in a bid to help support prices.

It was the second meeting of the organization in July, which has seen crude oil reach its highest levels in months. Crude oil future prices reached a 52-week high in mid-July.

OPEC and non-OPEC started their 18th meeting on July 1 but then it was suspended on July 2. The OPEC announced at the time that it would continue on July 5 but it didn’t take place.

OPEC had said on June 29 in its Monthly Oil Market Report it projected global oil demand to rise by 6 million barrels per day in 2021, while world economic growth is forecast at a rate of 5.5% in the same period.

Brent front-month future prices had closed Friday July 16, 2021 at $73.59, down from a 52-week high of $76.49 on July 13. This compared with just over $43 a year earlier and under $52 per barrel at the start of the year. 

Crude oil prices have come back from 2020, when prices of crude at one point reportedly became negative in April 2020 with many refineries shut or running at lower rates and the industry unable to find enough crude storage facilities. 

“The oil and gas industry led the stock market for the first half of 2021, a significant change from its last-place finishes of recent years,” according to a report from the Institute for Energy Economics and Financial Analysis on July 15.

“The oil price increase not only benefits investors, it also offers relief to oil-dependent state and local governments in the United States. 

“But geopolitics has also revealed cracks in the oil industry’s bullish outlook. The memory of last year’s oil price war between Saudi Arabia and Russia remains fresh. And just last week, a disagreement between the United Arab Emirates and the rest of OPEC grabbed headlines,” it added.

The OPEC said on July 1 that the outlook for worldwide oil demand was “on course to grow by 6 million barrels per day in 2021, after its turbulent 9.3 million barrels-per-day decline last year.” 

Current OPEC members include Algeria, Angola, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the Republic of the Congo, the United Arab Emirates , Venezuela and Saudi Arabia which takes a leading role as biggest  producer.

The non-OPEC countries that coordinate policy with OPEC have included Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, South Sudan, Brazil and Bolivia with Russia playing a leading role.

The U.S., by far the biggest consumer, imports crude oil and competes for world export energy markets against OPEC and non-OPEC. China is the second biggest consumer.

U.S. crude oil production averaged 11.3 million barrels per day in 2020, 8% less than a record high in 2019. Saudi Arabia production was 9.2 million barrels in 2020. Russia produced about 10.3 million barrels of oil and gas condensate in 2020. The world’s total crude oil production is about 100 million barrels per day.

The CEO of a refining company shared in March with Reuters Events Downstream commentary about the recovery of oil demand by type of fuel.

InterPipeline, Pembina shareholders to vote on merger

Pembina Pipeline said on July 16 that it does not intend to increase or change its offer under its proposed acquisition of all of the common shares of InterPipeline as shareholders prepare to vote on the merger.

Both Canadian companies operate mainly in the midstream. InterPipeline is buiding a PDH/polypropylene complex while Pembina had contemplated building one but later canceled plans amid Covid-related uncertainty.

“Shareholders are encouraged to vote for the strategic combination in advance of the proxy voting” with deadlines on July 27 for InterPipeline and on July 29 for Pembina, it said. 

Pembina and InterPipeline entered on May 31 into an agreement under which Pembina would acquire InterPipeline. The agreement followed an uninvited offer for InterPipeline from an unwelcomed suitor.

By Reuters Events Downstream