Saudi Arabia is reportedly ready to extend current OPEC+ production cuts over May and June and also keep cutting 1 million bpd in oil output unilaterally, according to an unnamed source who spoke to Reuters.
OPEC+ hasn't significantly eased oil production since January when the collective output was increased by 500,000 bpd from 7.7 million bpd in December to 7.2 million bpd. Considering the still weak global demand, OPEC+ decided in January to give Russia and Kazakhstan small increases for February and March, keeping overall production little changed.
Since then, the cartel has remained cautious with any production changes as exempt OPEC members Libya and Iran kept increasing their production rates while the pandemic situation in some key markets remained more dynamic than oil producers would have liked.
With some European countries tightening movement restrictions further amid yet another spike in infections and the United States also reporting higher new infection rates despite accelerating vaccinations, uncertainty about when oil demand will rebound has heightened. This is likely the primary factor determining Saudi Arabia's reported willingness to keep cutting at the present rate.
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"They don't see demand as yet strong enough and want to prevent prices from falling," the Reuters source told the news agency.
Yesterday, Reuters cited another unnamed source as saying that Russia, too, was willing to back a further extension of the current cuts, but it also wanted to secure approval for a moderate increase in its own production to respond to higher seasonal demand at home.
The OPEC+ joint ministerial committee is meeting tomorrow to discuss production levels and the market situation ahead of the oil ministers' meeting on Friday. Even if the cartel ends up rolling over current cuts, prices may not be affected too much. According to some, traders have already priced in the roll-over.
By Irina Slav for Oilprice.com
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