LONDON – A group of some of the world’s most powerful oil-producing countries will meet on Thursday to discuss the next phase of production policy amid the ongoing coronavirus crisis.
OPEC and its non-OPEC partners, an energy alliance sometimes called OPEC +, will meet by video conference from 1pm London time. A press conference is planned after the conclusion of the meeting.
Analysts generally expect OPEC + to reverse some of the production cuts it made last year, although oil prices led to speculation that the group could decide against the increase in oil prices. ‘offer.
International benchmark Brent crude futures traded at $ 63.78 a barrel during morning trading, down nearly 0.5%, while West Texas Intermediate (WTI) crude futures were down place at $ 60.94, 0.5% less during the session.
Gross futures have risen to pre-virus levels in recent weeks, driven by substantial reductions in OPEC + production and the massive deployment of Covid-19 vaccines in many high-income countries.
OPEC’s de facto leader, Saudi Arabia, has publicly encouraged Allied partners to remain “extremely cautious” in production policy, and has warned the group against complacency, as it seeks to ensure a full recovery. of the oil market.
Meanwhile, Russia, which is not an OPEC leader, has indicated that it wants to move forward with an increase in supply, saying last month that the market has already balanced.
Energy analysts told CNBC earlier this week that they expected OPEC + to discuss the possibility of returning to the market up to 1.3 million barrels a day during April and perhaps beyond.
Oil-pumping cats, also known as “nodded donkeys,” are reflected in a puddle while operating at an oil field near Almetevsk, Russia, on Sunday, August 16, 2020.
Andrey Rudakov | Bloomberg via Getty Images
Amrita Sen, chief oil analyst at Energy Aspects, told CNBC’s “Squawk Box Europe” on Thursday that spare oil capacity would be the group’s “biggest challenge.”
“I understand they’re not just talking about April. (Saudi Arabia is saying essentially to everyone, ‘Look, it’s April and May.’) Just like they did in January when they discussed February and March production,” he said. dir Sen.
Saudi Arabia understands that oil producers, such as Russia, Iran and the United Arab Emirates, are ready to start pumping more oil into the market, he continued. Still, Riyadh remains “laser-focused” on reducing global oil inventories to the industry’s five-year average and will therefore push the group to hold back on reversing the cuts until May.
“Essentially different views and interests”
OPEC + initially agreed to reduce oil production by a record 9.7 million barrels per day last year, before reducing the cuts to 7.7 million and finally to 7.2 million from the gener.
From early February to March, the head of OPEC Saudi Arabia has taken on voluntary cuts of 1 million.
“Characteristic of the typical OPEC + divisions, the meetings will be home to a passionate debate that reflects different views and quintessential interests. Saudi Arabia remains the main force in the market management strategy. and it is by far the most prudent of all member states, “analysts said. he told Eurasia Group in a research note.
“The complex and contradictory dynamics that have emerged in recent days will complicate decision-making, but in general the most likely result is to be reduced by around one million barrels per day, which would include a partial decline in the Saudi Arabia’s first reduction of 1 million barrels per hour. “
VIENNA, AUSTRIA – 20/06/2018: The OPEC logo is seen in the building of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna. The 174th OPEC meeting will be held on June 22, 2018 in Vienna. (Photo by Omar Marques / SOPA Images / LightRocket via Getty Images)
Images SOUP | LightRocket | Getty Images
Ahead of Thursday’s meeting, OPEC Secretary-General Mohammed Barkindo stressed the need to remain cautious as several ministers pressured to loosen production quotas.
He warned that the Covid crisis still posed negative risks to the world economy and the distribution of vaccines, which favor the world’s richest nations, could lead to an uneven recovery.
“Speculation is that Saudi Arabia could surprise the market by not returning its two-month unilateral cuts of 1 thousand bl / day that it will maintain until February and March 2021,” said Bjarne Schieldrop, chief analyst of SEB raw materials, in a note. .
“Our expectation is that OPEC + will increase production by 1-1.5 m bl / day in April 2021. If the group only increases 1 m bl / day, it would mean that Saudi Arabia will continue to slow down. unilaterally more than its fair share of “to further favor the market,” Schieldrop added.