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OPEC+-OIL-MARKET
OPEC+ expected to stay cautious in face of market jitters
LONDON, April 1, 2021 (BSS/AFP) – Oil producing countries grouped together
under the OPEC+ alliance led by Saudi Arabia and Russia are expected to agree
an extension to their current output cuts at a meeting on Thursday.
Their third ministerial meeting of 2021 will be held via videoconference
and is scheduled to start at 1200 GMT.
“The producer alliance is virtually guaranteed to extend current oil cuts
into May,” according to Stephen Brennock of PVM, reflecting a widespread view
among analysts. “It may even go a step further and prolong supply curbs into
June,” he added, with the possibility that Russia and Kazakhstan may be given
some small leeway to increase output as happened earlier in the year.
Under its current agreement, the OPEC+ group — made up of the Organization
of Petroleum Exporting Countries and its allies — is enforcing drastic cuts
in production, meaning seven million barrels that could be shipped to markets
every day are being left in the ground.
In addition, Saudi Arabia has volunteered to cut its own output by one
million barrels per day (bpd) to help avoid oversupplying a market suffering
from a collapse in demand due to the coronavirus pandemic.
Without the cuts, limited storage capacity could be saturated and prices —
currently hovering around $60 per barrel — could fall.
– ‘Challenging environment’ –
After signs at the beginning of the year that the arrival of vaccines could
improve the pandemic situation, the market has been dampened by a third wave
in Europe and the spread of the virus in key crude consumer markets such as
India and Brazil.
The International Energy Agency (IEA) reflected this more downbeat outlook
in forecasts contained in its last report this month.
It estimated that global demand could take another two years to get back to
its pre-crisis levels.
On Wednesday, OPEC+ ministers held preliminary discussions in the form of
its Joint Ministerial Monitoring Committee (JMMC), which is tasked with
overseeing implementation of agreements.
OPEC Secretary General Mohammed Barkindo told ministers that “we need to
remember that the environment remains challenging, complex and uncertain”.
The “market volatility” in recent weeks was “a reminder of the fragility
facing economies and oil demand,” Barkindo added, pointing to the “uneven
rollout of vaccines”, recurring lockdowns and “inflationary pressures” as
causes for concern.
“While normally such bearish statements would cause prices to dive, today
they work in a different way, as they are the reason the market believes
OPEC+ will not raise output,” said Louise Dickson of Rystad Energy.
Despite the usual differences in opinion between members, OPEC+ has been
able to agree on a policy of slow increases in capacity based on “caution”, a
watchword of Saudi Energy Minister Prince Abdulaziz bin Salman.
BSS/AFP/MSY/0945 hrs