OPEC’s forecasts point to an oil supply deficit in August and in the rest of 2021 as economies recover from the pandemic, suggesting the group and its allies have room to raise output at a meeting this week.

OPEC and allies, known as OPEC+, is returning 2.1 million bbl/d, about 2% of world output, to the market from May through July as part of a plan to ease last year’s record output curbs.

OPEC+ meets on July 1 to discuss supply for later months. With oil at its highest since 2018, sources say a further boost in August will be discussed, but some producers are wary about new demand setbacks and higher Iranian supply.

OPEC’s latest forecast of the demand for its crude suggests, if output levels stay the same, OPEC supply will fall short of expected demand by 1.5 million bbl/d in August. The shortfall widens to 2.2 million bbl/d in the fourth quarter.

Reuters Graph - Global Oil Supply Deficit in 2021
(Source: Reuters)

The above graphic is based on the assumption that the 10 OPEC members with quotas keep pumping at agreed July levels and Iran and other exempt producers stick to May's production—the latest month for which OPEC figures are available.

Also included in the graphic is OPEC’s own figure for the first quarter showing a 280,000 bbl/d deficit.

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Iran and world powers have been talking since April on reviving Tehran’s 2015 nuclear deal, which would allow Iran to boost output, so far without agreement.

Tehran pumped 2.5 million bbl/d in May and was producing 3.8 million bbl/d in 2018 before the U.S. tightened sanctions, OPEC figures show. So an extra 1.3 million bbl/d from Iran in the next few months would give OPEC+ less room to add supply without tipping the market into surplus.

OPEC+ cut output by a record 9.7 million bbl/d last year as demand collapsed when the pandemic first struck. As of July, the curbs in place will stand at 5.8 million bbl/d.