Opec+ likely to rollover output cuts to May

Dubai - Opec and non-Opec producers will support broadly stable oil production to ensure existing price levels as the demand is still to pick up momentum

The Opec+ group of producers are holding back about eight million barrels per day of output. — Reuters file

By Muzaffar Rizvi

Published: Tue 30 Mar 2021, 7:47 PM

The Organisation of the Petroleum Exporting Countries (Opec) and allies are expected to roll over its production cuts into May to ensure market stability, according to market insiders.

Opec, led by Saudi Arabia, and non-Opec producers such as Russia will support broadly stable oil production to ensure existing price levels as the demand is still to pick up momentum despite resumption of economic activities.

JP Morgan said Saudi Arabia was only likely to reverse its voluntary one million bpd additional cut in July, in two 500,000 bpd installments.

The US investment bank believes Opec and its will trade cautiously when they meet on Thursday by largely rolling over its production cuts into May and that Saudi Arabia will extend its voluntary cut by two more months until the end of June.

“We expect the alliance to start adding production in 500,000 barrel per day (bpd) increments beginning in June and lasting through August,” it said before Opec+ meeting on April 1.

Saudi, Russia on the same page

Referring to official sources, a Reuters report also claimed that Saudi Arabia and Russia are ready to support extending oil cuts by Opec and its allies into June and is also ready to prolong its own voluntary cuts to boost prices amid a new wave of coronavirus lockdowns.

A Saudi oil source said on Tuesday Opec+ had not taken any decision yet and discussions about policy had yet to start. The source briefed on the matter said on Monday that Saudi Arabia was keen to extend cuts beyond May and into June.

“They don’t see demand as yet strong enough and want to prevent prices from falling,” the source said.

The Opec+ group of producers, which are holding back about eight million barrels per day of output, one million of which is a Saudi Arabia’s voluntary cut, surprised the market on March 4 by deciding to hold output broadly steady.

Last year, the group agreed to cut 9.7 million bpd, or about 10 per cent of world output, but then eased back as demand recovered.

Oil slips ahead of Opec+ meeting

At a technical committee meeting on Tuesday, Opec Secretary-General Mohammad Barkindo “emphasised the need to remain very cautious and attentive to changing market conditions,” Opec said.

Meanwhile, Brent crude was down $1.02, or 1.6 per cent, at $63.96 a barrel by 1334GMT. West Texas Intermediate US oil was off by $1.16, or 1.9 per cent, at $60.40 barrel.

“The wobble we have seen in prices means that OPEC+ will likely need to take a cautious approach once again,” bank ING said.

“We are of the view that the group will likely hold output levels unchanged,” according to ING research note.

— muzaffarrizvi@khaleejtimes.com