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OPEC+ set to boost oil output as demand, prices rebound

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During a meeting in January, the OPEC+ group needed two tough days of talks to agree to gradually increase supply to the oil market. AFP

OPEC+ set to boost oil output as demand, prices rebound

Members of the OPEC group of oil producers and allies were expected to raise output in a meeting on March 4, in response to a rebound in demand and prices.

While the so-called OPEC+ group is often at loggerheads over how much oil to pump to the market, a sudden plunge in prices triggered by the coronavirus pandemic led members to agree on a dramatic cut in output to underpin prices.

Now that vaccination campaigns are underway and demand from China, the world’s largest oil importer, has bounced back to pre-pandemic levels, the success of the meeting on March 4 will hinge on whether heavyweights Russia and Saudi Arabia can agree on a way forward.

“There is within the alliance a major difference of opinion on the capacity of the oil market to absorb new volumes” of crude, said Bjarne Schieldrop, chief commodities analyst at SEB research group.

The world’s second-largest crude producer after the US, Russia “leans for caution”, Schieldrop explained, while number three, Saudi Arabia, “defends the increase in supply”.

On the sidelines of a technical meeting on March 2, OPEC head Mohammed Barkindo pushed for middle ground when he said the cartel must emphasise “cautious optimism” given persistent risks from the pandemic.

During a meeting in January, the alliance of 23 oil exporters needed two tough days of talks to agree to gradually increase supply to the oil market.

While 7.125 million barrels per day (bpd) were withheld from the market last month, the cartel lowered that figure to 7.05 million bpd for this month, effectively supplying the market with an additional 75,000bpd.

Experts generally expect that OPEC+ will agree to release another 500,000bpd next month.

In addition, Saudi Arabia could flood the market with an extra one million bpd if it decides to drop an extra production cut it voluntarily took on to facilitate agreement and allow Russia and Kazakhstan to increase their own production.

Iran, Venezuela and Libya have been exempt from OPEC’s quotas, while countries like Iraq and Nigeria have produced above quota for months, flouting the cartel’s agreement.

OPEC members are also monitoring any signs that US President Joe Biden might lift sanctions on Iran, which would allow Tehran to re-enter the global market and dramatically increase supply.

On March 3, the club assessed market conditions in its monthly meeting, held by video conference, but gave no statements to the media.

The videoconference summit on March 4 was set to be the second this year and was scheduled to start at 2:00pm (1300 GMT) in Austrian capital Vienna, where OPEC has its headquarters.

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