Oil price up but more OPEC+ output increases and Iran exports unlikely this year

  • Oil price up 2% after OPEC+ maintains its trajectory for output; obviously positive for exporters (Russia, Saudi et al)
  • If no other changes, global demand and supply will be up yoy by 5.5 and 4.6mbpd in Q4 21; 0.9mbpd supply shortfall
  • But more Iran exports, OPEC+ easing, and inventory drawdown can easily overfill that gap even with stable demand outlook
Oil price up but more OPEC+ output increases and Iran exports unlikely this year

The oil market is relieved that on 1st June OPEC+ stuck to its existing trajectory for easing output restraint and that there does not appear to be an imminent signature of a new Iran Nuclear Deal. Obviously, the latest upward move in oil price is positive for exporters in emerging markets. Oil price (Brent) above US$70 compares with fiscal break-evens nearer US$45 for Russia and US$65 for Saudi.

OPEC+ output cut response to 9.5mbpd demand hit in 2020

OPEC's forecasts for Q4 21 imply that global demand and supply will increase, compared to a year earlier, by 5.5 and 4.6mbpd, respectively. This leaves a supply shortfall of 0.9mbpd into which, potentially, new Iran exports, additional OPEC+ output, and any further inventory drawdown need to fit. All of this, of course, assumes no significant hit to existing demand forecasts from fresh bouts of Covid-19 disruption.

Iran exports near zero versus 2018 peak of 2.5mbpd

The oil market is assuming this is likely but, as always, the margin for error remains a very fine one. At a minimum, in the final months of this year, there is unlikely to be room for both significant new Iranian exports AND significant new OPEC+ volumes (after the currently agreed increases are completed by the end of June).

Significant Iran exports and OPEC+ volumes unlikely in 2021

Oil importers and exporters in emerging markets

Oil exposure across emerging and frontier markets

Related reading

OPEC+ opens the tap unexpectedly and oil price goes up!, April 2021

ESG Oil wins just shift value to National Oil unless carbon consumption is taxed, May 2021

International Energy Agency calls time on Oil, May 2021

Russia revisited as Biden-Putin summit confirmed, May 2021

Saudi's 'Vision 2030' five years in, April 2021

Colombia underperforming oil peers and cheap but struggles to reform, May 2021

Most Viewed See latest

This report is independent investment research as contemplated by COBS 12.2 of the FCA Handbook and is a research recommendation under COBS 12.4 of the FCA Handbook. Where it is not technically a res...

Full Tellimer disclaimers