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Saturday, June 19, 2021
Home Uncategorized OPEC+ working on compromise for 2021 oil policy

OPEC+ working on compromise for 2021 oil policy

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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

March.

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.

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