Page 4 - MEOG Week 10 2021

MEOG COMMENTARY MEOG

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

P4 www. NEWSBASE .com Week 10 10•March•2021