Oil prices are “nowhere near” their peak as an impending rebound in Chinese demand threatens to strain a global market already pinched by tight supplies, said key OPEC member UAE.
The comments serve as an acknowledgment that last week’s decision by the OPEC+ coalition to bolster output will give consumers little respite from the soaring cost of energy this summer.
The Organisation of Petroleum Exporting Countries is struggling to restore production as planned, with spare capacity confined to just a few members, a UAE minister conceded.
“With the pace of consumption we have, we are nowhere near the peak because China is not back yet,” Minister of Energy Suhail Al Mazrouei said at a conference on Wednesday in Jordan. “China will come with more consumption.”
Al Mazrouei warned that without more investment across the globe, OPEC+ can’t guarantee sufficient oil supplies as demand fully recovers from the coronavirus pandemic. Prices can reach “unseen” levels if Russian oil and gas is completely taken off the market, he said.
OPEC+ agreed last week to open its oil taps a little faster in the summer months. That modest supply boost amounts to just 0.4 per cent of global demand over July and August and comes after several months in which the group has struggled to hit its production targets.
“We’re lagging by almost 2.6 million barrels a day, and that’s a lot,” Al Mazrouei said.
Only Saudi Arabia and the UAE have significant volumes of idle production capacity, but even that is only enough to offset a portion of the supply gap created by sanctions on Russia.
“The situation is not very encouraging when it comes to the quantities that we can bring,” Al Mazrouei said.
OPEC Secretary-General Mohammad Barkindo echoed the UAE’s comments, stressing the lack of spare capacity in the group.
“With the exception of two-three members, all are maxed out,” he told Bloomberg, expanding on remarks given at a conference hosted by RBC Capital in New York. “The world needs to come to terms with this brutal fact.”