OPEC and Russia have moved closer to a compromise over oil supply policy for
2021 after talks earlier this week failed to yield a decision on how to tackle weak
oil demand amid a second coronavirus wave, OPEC+ sources told Reuters.
The Organization of the Petroleum Exporting Countries, Russia and their allies,
a group known as OPEC+, had been widely expected to extend existing oil cuts
of 7.7 million barrels per day (bpd), or 8 percent of global supplies, until at least
But after hopes for a speedy approval of anti-virus vaccines spurred an oil price
rally at the end of November, several producers started questioning the need to
keep such a tight rein on oil policy.
OPEC+ sources have said Russia, Iraq, Nigeria and the United Arab Emirates
have all to a certain extent expressed interest in supplying the market with more
oil in 2021.
“Things are heading towards a compromise,” one OPEC delegate said.
Energy Aspects, a consultancy, wrote: “We understand that there has been
tentative progress in discussions between OPEC+ members today and that
ministers are inching closer to a compromise that should break the impasse.”
Sources have said options now range from a rollover of existing policies to easing
cuts each month by between 0.5 million to 1.0 million bpd starting from January,
February or March.
Two sources told Reuters the preferred option was a combination of those
proposals, initially rolling over existing cuts with a gradual output increase
starting in later months.
OPEC+ has to strike a delicate balance between pushing up oil prices enough to
help their budgets but not by so much that rival U.S. output surges. U.S. shale
production tends to climb above $50 a barrel. Prices are now around $48.
Adding to the challenge within OPEC+, Moscow’s finances can tolerate lower oil
prices than Riyadh’s.
JP Morgan estimated that additional production of 2 million bpd would cost
OPEC+ $55 billion in lost revenues in 2021, as the price drop would outweigh
the benefit for higher output.