Save for later Print Download Share LinkedIn Twitter Expectations for a supply shortage support oil's latest bull run, with benchmark Brent flirting with $85 per barrel this week. Bulls see oil demand recovering further from the pandemic this year, with supply falling short due to recent weak upstream investment. The prevailing belief is that this will expose Opec-plus spare capacity as an empty shell, possibly paving the way for a new supercycle in oil. Energy Intelligence now puts Opec-plus spare capacity at less than 3.5 million barrels per day. But if the group follows its agreement and adds 400,000 b/d through September, only Saudi Arabia and the United Arab Emirates would be left with any substantial spare capacity, with a trickle remaining in Kazakhstan and Oman. All told, this would amount to a precarious 1 million b/d. The market does not believe Opec-plus can reach its goal of producing 43.7 million b/d by September — the total of the output targets for its 20 producers, including Mexico but excluding Iran, Libya and Venezuela, per the current agreement. A driving force behind Brent’s recent strength is that an increasing number of Opec-plus producers are already falling short of allotments, a situation that will become more visible in the coming months if the group continues to unwind more cuts. Nigeria, Angola and Malaysia are already far behind, leaving Opec-plus output 700,000 b/d short of its December goal.
