Opec+ agrees on small output hike

Vienna - Production to increase by 500K starting January, but no long-term deal forged

Opec and Russia on Thursday agreed to a modest oil output increase from January by 500,000 bpd but failed to find a compromise on a broader and longer term policy for the rest of next year, four Opec+ sources told Reuters and confirmed by the Energy Ministry of Kazakhstan.

The increase means the Organisation of the Petroleum Exporting Countries and Russia, a group known as Opec+, would move to cutting production by 7.2 million bpd, or seven per cent of global demand from January, compared with current cuts of 7.7 million bpd. The curbs are being implemented to tackle weak oil demand amid a second coronavirus wave. Opec+ had previously been expected to extend existing cuts until at least March.

But after hopes for a speedy approval of anti-virus vaccines spurred an oil price rally at the end of November, several producers started questioning the need to keep such a tight rein on oil policy, as advocated by Opec leader Saudi Arabia.

Opec+ sources have said Russia, Iraq, Nigeria and the UAE have all to a certain extent expressed interest in supplying the market with more oil in 2021.

The Kazakhstan’s ministry also said the group would now gather every month to decide on output policies beyond January and monthly increases are unlikely to exceed 500,000 bpd.

Opec+ has to strike a delicate balance between pushing up oil prices enough to help their budgets but not by so much that rival US output surges. Crude prices were little-changed after the decision at around $48 a barrel.