Opec+ meeting to focus on near-term risks from Covid-19
Energy group to meet on April 28 to discuss the latest developments in the market
Opec+ group will focus on near-term demand risks related to an uptick in Covid-19 cases globally at its next meeting taking place on April 28.
At its last meeting earlier this month, Opec+ agreed to increase production levels by two million barrels per day between May and July.
Edward Bell, senior director for market economics at Emirates NBD Research, said whether or not the market will be able to sustain that level of increase depends on how badly demand is being affected by the current rise in the number of Covid-19 cases in India and lockdowns in some other economies.
Oil refineries in India have already lowered processing rates due to demand dropping off as economically significant states enter lockdown.
“As the daily number of new cases has yet to hit a plateau, the near-term economic hit is likely to be sharp and may feed into the summer months,” said Bell.
So far market reaction to the risk of a drop-off in India’s demand has been limited. Brent futures have oscillated between around $65-68 a barrel in the last few weeks.
Monica Malik, chief economist at Abu Dhabi Commercial Bank, also doesn’t see any changes to the production plan announced by Opec+ earlier this month but she pointed out that the group will highlight increasing concerns about the pandemic situation in India and its potential impact on the global demand outlook.
“We expect Opec to reiterate that it stands ready to adjust its output policy if necessary. There have also been some suggestions that the US is open to easing some of its sanctions related to Iran’s economy, including on oil and finance. Any such move would lead to supply-side concerns returning to the oil market,” she said.
However, recent US comments indicate that a wide gap still remains with Iran over negotiations.
Bell said Opec+ to closely track the diplomatic negotiations between Iran and the US and seek to reintegrate Iran into a production target system quickly if it were able to export crude freely.
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