322 Save for later Print Download Share LinkedIn Twitter With winter demand about to ramp up and prices for oil, gas and power already soaring, Opec-plus is now facing a challenging quarter in which oil inventories may fall below the pre-pandemic levels of 2019. Energy Intelligence projections show that global oil stocks will be drawn down at an average rate of around 1.3 million barrels per day for the rest of 2021, even if Opec-plus keeps increasing supply in monthly increments of 400,000 b/d as planned.Crude's recent rally above $80 per barrel also indicates that many market participants think the increase in Opec-plus output may not be enough to satisfy winter demand."The underlying fact remains ... that demand is causing a disappearance of inventories a lot faster than the 400,000 b/d a day that Opec has proposed to put on the market," said Mike Muller, Vitol's head of trading in Asia.Supply Sweet SpotBecause of its abundant spare capacity, Opec-plus controls marginal supply and that also puts it in effective control of crude prices this winter.The alliance must now find the sweet spot for supply, at which inventories are not drawn down too fast, but crude avoids a price slide that would discourage producers from fixing longer-term supply issues. Opec Secretary-General Mohammed Barkindo told the recent Energy Intelligence Forum that the oil and gas industry will require $11.8 trillion of investment through 2045 to satisfy demand and avert acute energy crises.In the short term, Opec and its non-Opec allies will have to make a careful assessment of how the recent run-up in crude prices will affect demand, while also factoring in additional demand for oil driven by high prices for coal and gas.Analysts estimate that substitution of oil for gas — at power plants, refineries and other industrial plants — could boost demand for oil by 200,000-300,000 b/d to twice that volume this winter. Fair Price?Iraqi Oil Minister Ihsan Ismael told the Forum that a price of $75/bbl to $80/bbl would be fair for both producers and consumers, suggesting that Opec may be quite comfortable with the current state of affairs."Consuming economies, including Washington, have been moaning ever since prices moved into the $70s. But we must remind ourselves that we spent nearly five years at an average price of around $110 a barrel," said Vitol's Muller.High energy prices are generally seen as a damper on economic activity, which could lead to a loss of momentum in large oil-importing countries like India and China."The market had Opec-plus to thank to drag it out of a $20 hole last April. The question is: Is the market thankful now when oil prices are up above $80? I'm not so sure, things just seem a bit uncomfortable," said Star Fuels Director Matt Stanley.China WobblesChina's economy has already taken a hit from high commodity prices and the loss of confidence triggered by the crisis around real estate developer Evergrande.But in response to recent energy shortages, Beijing has told state-owned energy companies to secure sufficient winter supplies at any cost. It remains to be seen whether Opec-plus will heed calls to support the global economy by accelerating a return to full oil production. The last time that Washington pressed key producers to step up their output was in August, but prices continued to creep higher. And producers may choose instead to keep plucking the fruits of higher prices ahead of a potential deal to lift US sanctions on Iran's oil exports. Such an agreement between Washington and Tehran would open the door to additional supply and lower prices.