The leaders of the OPEC+ pact, Saudi Arabia and Russia, have requested an informal meeting of the Joint Ministerial Monitoring Committee (JMMC) to be held on Saturday, before the alliance’s formal meetings on November 30 and December 1 to decide whether to extend the current level of oil production cuts, Bloomberg reported on Friday, citing a letter it had seen. Saudi Energy Minister Prince Abdulaziz bin Salman and Russia’s Deputy Prime Minister Alexander Novak—who co-chair the JMMC meetings—have requested the last-minute talks of the panel which typically gives recommendations to the full OPEC and OPEC+ meetings on how to proceed with oil supply policies.
At the monthly JMMC meeting last week, the panel did not announce publicly any recommendation about the ongoing cuts, but said that “All participating countries need to be vigilant, proactive and be prepared to act, when necessary, to the requirements of the market.”
Analysts and market participants largely believe that OPEC+ will extend the current level of cuts of 7.7 million barrels per day (bpd) for three months until the end of March 2021, instead of easing those cuts by 2 million bpd as of January 2021.
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The OPEC+ group is also reportedly leaning towards a three-month extension, in light of expected weakened oil demand in the current COVID-19 surge in many major economies. Growing oil production from Libya, which is exempted from the cuts, is also a concern for the alliance and the market.
Despite the recent rally in oil prices, which hit their highest level since before the previous OPEC+ pact collapsed in early March, the group continues to lean toward an extension of the current cuts, sources close to the OPEC+ group told Reuters on Wednesday.
The best choice looks to be a three-month extension, while the price rally this week has been more about sentiment instead of fundamentals, one of the sources told Reuters.
By Tsvetana Paraskova for Oilprice.com
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As for Libya which is currently exempted from the cuts, It should be included in the cuts once its production hits 1.2 mbd.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London