Page 4 - FSUOGM Week 10 2021

FSUOGM COMMENTARY FSUOGM

OPEC+ largely maintains

cuts with new deal

OPEC+ members agreed to add only 150,000 bpd of output in April, with

Saudi Arabia having pushed hard to maintain restraint among its partners

OPEC OPEC and its partners in the OPEC+ group amid intentional oversupply and the coronavirus
decided at last week’s meeting to largely maintain (COVID-19) related impact on demand, Riyadh
WHAT: the output cuts they committed to in January in a has pleaded for caution. Saudi Energy Minister
The group elected to move that took the market by surprise. Prince Abdulaziz bin Salman Al Saud has repeat-
keep the production cuts Aside from Russia and Kazakhstan, the group edly voiced his concern about easing the restric-
largely unchanged as it will continue to limit output by the same levels tions, suggesting that it was not the time to turn
seeks to maintain price agreed at the start of the year, with de-facto on the taps. Growing COVID-19 case numbers
stability amid uncertainty leader Saudi Arabia having pushed hard for in Europe, in particular, were highlighted as pro-
about the global greater compliance and caution amid uncer- viding sufficient concern for the group to remain
economic recovery. tainty about the recovery of demand. This means nervy. Meanwhile, with the continent’s vaccine
OPEC+ output will be restricted by around 7mn rollout having made a stuttering start, worries
WHY: barrels per day (bpd) throughout April, plus Sau- are growing about the outlook for travel during
The anti-COVID-19 di’s additional voluntary 1mn bpd cut. the summer holiday season.
vaccine rollout has yet Meanwhile, having already been allowed to Most traders and analysts had anticipated
to gain much traction expand output by a combined 75,000 bpd dur- an increase of around 500,000-1mn bpd after
in Europe, and there ing each February and March, Kazakhstan and it emerged that the group was discussing such a
are concerns about Russia will raise production by 20,000 bpd and hike. In retrospect, market watchers should per-
the outlook for travel 130,000 bpd respectively, largely because of sea- haps have known better than to anticipate much
during the northern sonal demand. movement. It is interesting to note that Iraqi Oil
hemisphere’s summer Minister Ihsan Abdul Jabbar said in mid-Febru-
holiday season. Against the grain ary that he anticipated that OPEC+ would keep
Prices have recovered sufficiently to bring things as they were at the March meeting.
WHAT NEXT: greater confidence to producers about the medi- With prices rising to around $70 per bar-
Saudi Arabia appears um-term outlook for the market, and with the rel following the announcement, the market is
unlikely to remove its group’s members having seen their economies enjoying stability it has not seen for more than
voluntary 1mn bpd taking a battering over the past year, desire to a year, both vindicating Prince Abdulaziz’s
cut next month, with a ramp up output to take advantage of higher conservatism and the leadership that Saudi has
gradual approach far prices was understandable. shown to right the ship.
more likely. However, since taking drastic action to rebal- Speaking to Anadolu Agency last week, Ian
ance the market when it collapsed in early 2020 Simm, principal advisor at IGM Energy, said:

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