Page 4 - FSUOGM Week 14 2021

FSUOGM COMMENTARY FSUOGM

OPEC+ to ease taps in May

Russia will continue to play harder ball with Saudi Arabia in negotiations moving forward

OPEC THE OPEC oil cartel and its allies have agreed accept that some countries – mainly Russia –
to ease production cuts in May following their were allowed to constantly hike their production
WHAT: monthly meeting, with 350,000 barrels per day while others kept it flat,” Rystad analyst Louise
OPEC+ has agreed to (bpd) of supply set to return next month. Dickson said. “The outcome of the meeting is
ease cuts in May-July. A further 350,000 bpd will be restored in June also revealing that even though the group’s own
and around 400,000 bpd in July. Saudi Arabia is experts warned about the lagging oil demand
WHY: expected to return a further 250,000 bpd of oil to recovery and the market risks that the extended
Despite some bearish the market next month, having made a voluntary lockdowns are bringing, decision-makers have
sentiment expressed, 1mn bpd cut earlier this year. another vision.”
OPEC+ appears to be Under the new agreement, OPEC+ will pro- Rystad said the market was set to be balanced
banking on a strong duce 6.5mn bpd less oil than the baseline in May, in May, with heavy maintenance taking place
outlook. versus 7mn bpd currently. The group agreed to across several countries and the delay to the
take an unprecedented 9.7mn bpd of supply Luanda refinery expansion in Angola.
WHAT NEXT: offline this time last year in response to the oil “By mid-summer, we expect the vaccine
Vaccine programmes price collapse triggered by the coronavirus hiccups to be a distance memory, and for many
should pick up pace (COVID-19) pandemic. developing countries to be nearing 50% vacci-
over the summer and the OPEC+ member Kazakhstan has said it nation rates,” Dickson continued. “Thus, we still
oil supply and demand will produce more oil in May and June, but has expect end-user demand to pick up over the
should tighten. not disclosed numbers. Russian Deputy Prime summer as economies open, and in line with
Minister Alexander Novak meanwhile told the seasonal demand.”
Rossiya-24 TV channel that his country would Extra supply and rising demand should push
increase oil production by a total of 114,000 bpd implied stocks to a nearly 3mn bpd deficit by
across the three-month period. August, according to Rystad.
However, with coronavirus case numbers Wood Mackenzie said the deal aligned with
once again on the rise in Europe and other its analysis for the second and third quarters of
regions, Saudi Energy Minister Prince Abdu- 2021.
laziz bin Salman warned that any decision could “We see the supply and demand balance
be “tweaked” in OPEC+’s meeting next month. tightening in both quarters with global stock
“The reality remains that the global picture is draws in each,” Wood Mackenzie vice-president
far from even, and the recovery is far from com- Ann-Louise Hittle said. “The agreement is sup-
plete,” the minister said ahead of the meeting. portive of oil prices, yet should also help avoid
The oil price recovery that began in late 2020 a sharp spike upward as oil demand picks up.”
began to falter in March, indicating that fuel Wood Mackenzie anticipates a strong recov-
demand is not picking up again as fast as pro- ery in US oil demand by the third quarter, with
ducers might have anticipated. Still, Brent has global demand rising 6.2mn bpd year on year in
remained above $60 per barrel, feeding into 2021.
bullish sentiment about the outlook for the rest Negotiations between OPEC+’s lead mem-
of the year. bers Russia and Saudi Arabia going forward are
“Today, there are figures that are much more likely to play out in similar fashion as they have
positive concerning the market, including the done.
level of stocks, which have considerably fallen as Saudi Arabia will push for more restraint, as
demand increases,” Russia’s Novak said. “Vacci- its economy and state budget are far more reliant
nation is already yielding positive results so that on oil revenues, with the kingdom’s fiscal break-
demand is recovering.” even point estimated at $76 per barrel in 2020.
Russia, meanwhile, needs only just over $40 per
Outlook barrel to balance the books over the coming
“The decision by OPEC+ shows that patience years, and will therefore be better positioned to
was exhausted among producers, who could not play hard ball in talks. ™

P4 www. NEWSBASE .com Week 14 07•April•2021