The terms of the OPEC+ production pact could be revised if oil demand recovers next year faster than currently expected, Russian Deputy Prime Minister Alexander Novak, who is still in charge of coordinating Russia’s oil policy with OPEC, told Rossiya TV news channel in an interview on Monday.
The vaccine rollout is helping global oil demand to recover, and consumption could return to pre-crisis levels during 2021, Novak said.
According to the man who is the face of Russia’s oil policy, global oil demand could grow by between 5 million barrels per day (bpd) and 6 million bpd on an annual basis in 2021 compared to 2020—roughly in line with forecasts from the International Energy Agency (IEA) and OPEC.
Despite renewed fears about oil demand due to the new coronavirus strain, the leader of the non-OPEC group in the OPEC+ pact, Russia, is still in favor of another 500,000 bpd increase in the alliance’s oil production from February, Bloomberg reported last week, citing officials with knowledge of the Russian oil policy.
The original plan for a 2-million-bpd increase of OPEC+ production as of January was watered down to a 500,000-bpd rise for January in a compromise agreement, largely seen as a positive outcome that avoided a break-up of the OPEC+ pact or even of OPEC.
The total production cut for January will thus be 7.2 million bpd compared to the current 7.7 million bpd collective cut. The ministers decided to hold monthly meetings to decide the oil production policy for the following month.
At the January 4 meeting of the OPEC+ ministers, Russia will back another 500,000-bpd rise in the OPEC+ collective production from February, Novak told Reuters in comments cleared for publication on Friday.
“If the situation stays normal and stable, we will support this position (increase by 500,000 bpd),” Novak said at a briefing, as carried by Reuters.
By Tsvetana Paraskova for Oilprice.com
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Sooner or later the global oil market will have to be weaned off OPEC+ cuts. The vaccine rollout and a wider opening of the global economy will certainly help global oil demand return to pre-COVID levels sometime in 2021.
Demand trends suggest that Brent crude price could surge to $60 a barrel in the first quarter of 2021 rising to $70-$80 in the third quarter underpinned by a resumption of normal global economic activity and a continued steep decline in global oil inventories.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London