OPEC and allies including Russia are leaning towards delaying next year’s planned increase in oil output to support the market during the second wave of COVID-19 and rising Libyan output, despite a rise in prices, three sources close to OPEC+ said.
OPEC+ was due to raise output by 2 million barrels per day (bpd) in January - about 2% of global consumption - as it moves to ease this year’s record supply cuts. With demand weakening, OPEC+ has been considering delaying the increase.
Russia is likely to agree on a rollover of current output for the first quarter if needed, a source familiar with the issue said, and would prefer to decide later on extending for the second quarter.
“It looks like the extension is needed,” the source said, citing “possible price drops and demand uncertainties” amid the second wave of the virus.
Oil has rallied in the past week, rising to its highest since March near $49 a barrel on hopes that coronavirus vaccines will lead to higher demand. [O/R]
This hasn’t changed OPEC+ thinking around the extension, delegates said.
“This increase in prices is about sentiment, but we need to extend to have solid market fundamentals to support the prices,” said one. “So far, the best choice is the three-month extension.”
Still, enthusiasm for extended cuts is not universal, delegates and analysts say.
There are several technical meetings this week to prepare the ground for ministerial gatherings on Monday and Tuesday. All meetings are virtual due to the pandemic.
