As the dust from this week’s uneventful OPEC+ meeting now has settled, the market realized that the main news takeaway from the event is on non-compliance.

It looks quite challenging for certain members, such as Iraq, to compensate for their overproduction in previous months and that’s taken as bearish news by the market today.

Amid no other ‘hard news’ prices naturally follow supply indications and as OPEC’s naughty corner has produced more than it promised, this takes a small toll today.

It also raises the question, for how long will other members such as Saudi Arabia accept the non-compliance of the laggards? If non-compliant members get punished this will be a blow for the group’s bond. It remains to be seen how the alliance will handle this sensitive sticky point.

Supply is one thing but demand is also another concern for the market. Covid-19 does not seem to slow down and we see some return of restrictions in Europe and beyond. Even though OPEC+ seemed mostly optimistic about the demand’s recovery, we see it rather lagging.

Demand, in our view, is only likely to near pre-pandemic levels in 2021 and the rest of 2020 will be a muted struggle while facing the effects of the second wave.

On a positive note, compared to our expectations, OPEC+ has still complied as an alliance quite well with the target cuts, and that is why prices maintain their 40+ dollar levels. The cuts that this group of countries has implemented are unprecedented and have helped the market.

While there is so much uncertainty over Covid-19, the current global production levels are providing a cushion for prices to safe-guard some profitability for producers.

Now that the OPEC+ meeting is behind us, we believe we will enter a short-term period of bearish news, with a moderate global oil glut shaping in the next three months. Traders will be keeping an eye on global inventories in weeks to come as crude stock levels and refinery runs will be the key indicators of where the global market is moving.