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 via video conference from 13:00 London time. A press conference is scheduled after the end of the meeting.
Analysts generally expect OPEC + to overcome some of the production cuts it made last year, although oil prices have suggested that the group may decide not to increase supply.
Brent International Crude Oil Reference Futures traded at $ 63.78 a barrel during the morning trade, down nearly 0.5 percent, while US West Texas Crude Stock Futures (WTI) traded at $ 60.94 , about 0.5% lower for the session..
In recent weeks, crude futures have risen to pre-virus levels, driven by significant cuts in OPEC + production and the mass release of Covid-1
The de facto leader of OPEC, Saudi Arabia, has publicly encouraged allied partners to remain “extremely cautious” on production policy, warning the group against complacency as it seeks to ensure a full recovery in the oil market.
Meanwhile, the non-OPEC leader Russia said it wanted to continue to increase supply, saying last month that the market was already balanced.
Energy analysts told CNBC earlier this week that they expect OPEC + to discuss allowing about 1.3 million barrels a day back on the market in April and possibly beyond.
Oil-pumping jacks, also known as “nodding donkeys,” are reflected in a puddle while working at an oil field near Almetyevsk, 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 the reserve oil capacity would be “the group’s biggest challenge.”
“I understand that they are not just talking about April. (Saudi Arabia) says to everyone in essence: “Look, it’s April and May. “Just like they did in January when discussing the results of February and March,” Sen said.
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, she continued. However, Riyadh remains “laser-focused” on reducing global oil inventories to the industry average for five years, and will thus urge the group to keep reversing the cuts until May.
“Essentially different views and interests”
OPEC + initially agreed to cut oil production by a record 9.7 million barrels a day last year, before cutting cuts to 7.7 million and eventually 7.2 million from January.
Since then, the king of OPEC Saudi Arabia has made voluntary cuts of 1 million from early February to March.
“Typical of typical OPEC + divisions, the meetings will be home to a passionate debate that reflects significantly different views and interests. Saudi Arabia remains the main force behind the market management strategy and is the most cautious of all member states,” analysts said. Eurasia Group says in a research note.
“The complex and contradictory dynamics that have emerged over the last few days will complicate decision-making, but in the end the most likely outcome is reduced by about 1 million barrels per day, which would include a partial rollback of the earlier reduction of 1 million barrels per day in Saudi Arabia. “
VIENNA, AUSTRIA – 06/20/2018: The OPEC logo can be 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: Omar Marques / SOPA Images / LightRocket via Getty Images)
SOPA images LightRocket | Getty images
Ahead of Thursday’s meeting, OPEC Secretary General Mohamed Barkindo stressed the need to be cautious, as several ministers called for a relaxation of production quotas.
He warned that the crisis in Kovid still poses negative risks to the world economy and the spread of vaccines that favor the world’s richest countries could lead to an uneven recovery.
“There is speculation that Saudi Arabia may actually surprise the market by not returning its two-month unilateral cuts of 1 million. / Day held in February to March 2021, “said Benner Shieldrop, chief commodity analyst at SEB, in a note.
“Our expectations are that OPEC + will increase production between 1-1.5 million billion. Daily in April 2021. If the group increases by only 1 million billion. “On a daily basis, this will mean that Saudi Arabia continues to unilaterally hold more than its fair share of weight to support the market further,” Shieldrop added.