Through Evgenia Pismennaya, Olga Tanas and Salma El Wardany at 06/22/21

Saudi Aramco Reservoir Farm

(Bloomberg) – OPEC + is discussing whether to further increase production at next week’s meeting as the oil market looks increasingly tense.

Moscow is considering making a proposal that the group should ease a global supply deficit by increasing production, according to Russian officials familiar with the matter. Other OPEC + countries are also discussing a possible increase in supply in August, although specific numbers were not mentioned, a delegate said.

Crude has just hit $ 75 a barrel in London for the first time in two years, as a strong recovery in demand following the coronavirus pandemic hits supply constraints. The Organization of the Petroleum Exporting Countries and its allies are already relaunching about 2 million barrels per day of unused production from May through July, but influential voices in the market are asking for more as prices rise.

Saudi Arabia, the de facto leader of OPEC + alongside Russia, has so far given no clear signal on where it will take in talks next week. The kingdom has generally been cautious about undoing cuts, Energy Minister Prince Abdulaziz bin Salman saying last week he wanted to see clear evidence of a strong recovery in demand before restoring more interrupted production.

The International Energy Agency has urged OPEC + to start tapping its slack generation capacity to boost supply as demand rebounds. Goldman Sachs Group Inc. estimates that the market is in deficit of 3 million barrels per day, citing a lack of significant growth in production. OPEC + still retains up to 5.8 million barrels per day from the market.

Related article: BP CEO Sees Lasting Trends in Global Oil Demand Growth and Limited US Crude Production

Nuclear talks between the United States and Iran have gone on longer than expected, overturning expectations that sanctions on Islamic Republic’s crude exports may soon be lifted and adding further uncertainty to OPEC + deliberations . International oil companies and U.S. shale drillers are also keeping tighter control over their production than during the last price rally, as their investors demand lower spending and better returns.

Moscow expects a global supply deficit to persist in the medium term, two officials said, asking not to be named as the talks are not public. The country’s final position ahead of the next OPEC + rally is still being worked out, another official said.

Related Story: Russia’s Rosneft Predicts Global Oil Shortages During ‘Hasty’ Energy Transition

Russian Deputy Prime Minister Alexander Novak is “in constant contact” with Saudi Arabia, Kremlin spokesman Dmitry Peskov said on his daily conference call. So far, there is no need for the Russian and Saudi leaders to hold direct talks on OPEC + policy, he said.

Russia’s biggest oil companies said this month that the OPEC + coalition should continue to ramp up production to meet rising global consumption. Novak met with company executives on Tuesday, although the discussion focused on domestic fuel markets, people familiar with the matter said.

Click here to subscribe to the World Oil Energy newsletter and receive exclusive industry news and analysis delivered to your inbox every weekday.