The OPEC+ group is considering keeping their collective oil production cuts in April, given the still-fragile global demand recovery, three OPEC+ sources told Reuters on Wednesday.
OPEC and its non-OPEC allies led by Russia are keeping around 7 million barrels per day (bpd) off the market to help the market rebalance and prop up prices after the pandemic shock to demand. OPEC’s top producer and the world’s top exporter, Saudi Arabia, is also additionally cutting 1 million bpd in February and March on top of its quota.
The market has been expecting some sort of production increase from the OPEC+ alliance in April, especially in light of the recent oil price rally.
According to Reuters’ sources, however, some key members of OPEC have proposed keeping the current level of OPEC+ cuts intact in April, while it is not immediately clear if Saudi Arabia would reverse its extra 1 million bpd cut from April.
Following the Reuters report that OPEC+ may not increase production from April after all, contrary to most expectations, oil prices rallied by 2 percent as of 7:20 a.m. ET early on Wednesday.
At the Joint Technical Committee (JTC) meeting on Tuesday, OPEC Secretary General Mohammad Barkindo said that the global economic outlook and oil market prospects showed signs of continued improvement. Still, given continued uncertainties, Barkindo emphasized the need for “cautious optimism.”
The OPEC+ ministers are holding a virtual meeting on Thursday to decide how to proceed with the cuts. OPEC+ experts said in a document on Tuesday seen by Reuters that the recent rally was more the result of financial investors and speculators instead of significantly improved oil market fundamentals.
Heading into the meeting, it looks like the leaders of OPEC+, Saudi Arabia and Russia, are again at odds over who will be cutting how much, with Moscow reportedly pushing for an aggressive easing. Riyadh, via its Energy Minister, Prince Abdulaziz bin Salman, has recently warned oil producers to remain “extremely cautious” and not be complacent.
“Those who are trying to predict the next move of OPEC+, to those I say, don’t try to predict the unpredictable,” Prince Abdulaziz bin Salman said two weeks ago.
By Tsvetana Paraskova for Oilprice.com
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