Saudi Arabia and Russia are talking about bringing back online 1 million bpd to the oil market, the Wall Street Journal reported on Thursday, citing sources familiar with the matter.
They have not reached an agreement.
This is largely in line with what analysts from ING Bank expect, which is that OPEC+ will agree to boost its combined output by 500,000 barrels daily at today’s meeting and add to that Saudi Arabia’s reversal of voluntary cuts of 1 million bpd, but are upbeat about the market’s ability to absorb this.
“The outcome of today’s OPEC+ meeting is obviously key for market direction,” Warren Patterson, head of commodities strategy at the Dutch bank, told Bloomberg. “The market can easily absorb this additional supply, in fact it would be able to absorb even more,” he said.
Others, however, allow for the possibility that the extended cartel may stick with current production control levels, Reuters reported, noting this mood is keeping prices stable ahead of the meeting. The news outlet cited three sources from OPEC as suggesting the meeting might end with a decision to roll over current cuts to April. According to Bloomberg sources, however, there is little chance of that happening.
Interestingly enough, Citi analysts have said they expected Saudi Arabia to keep its voluntary cuts, at some 994,000 bpd. This may indeed happen as the Kingdom strives for a higher, not lower, oil price, on which it is a lot more dependent than some of its partners.
Nothing is certain, however, until the meeting wraps or, if luck would have it, the decision gets delayed as already happened once at an earlier meeting when the cartel members failed to reach a quick decision. Meanwhile, the latest economic indicators suggest that energy demand is improving in key markets, Bloomberg noted, and this could serve as an argument for those who would insist on further relaxation of cuts.
The dominant expectation is for a further 500,000-bpd relaxation with the question remaining how fast Saudi Arabia will return those 1 million bpd to the market, if it sticks to its decision to do that.
By Irina Slav for Oilprice.com
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