OPEC, allies meet to thrash out deal
LONDON: The members of the OPEC group of oil producers were meeting with their allies yesterday to see if they could reach an accord on extending production cuts over the coming months.
VIENNA: In this file photo taken on March 06, 2020 a car drives in front of the OPEC office building during the 178th meeting of the Organization of Petroleum Exporting Countries (OPEC) in Vienna.-AFP
The video-conference meeting was pushed back from Tuesday and comes after three days of inconclusive discussions among the 13 members of OPEC proper.
Observers say the postponement points to an agreement being harder to reach than initially thought. The first wave of the coronavirus pandemic sent oil demand-and prices-plummeting in the spring, with the benchmark American contract even going into negative territory for the first time in history. After tough negotiations in April, OPEC+ — which includes Russia-agreed on drastic production cuts in order to try to put a floor under oil prices. Despite hitting producers’ revenues hard, those cuts did help drag prices back up again.
“Whether the easing would begin in January or after the three-month delay discussed before the meeting is unclear,” wrote Stephen Innes of Axi. After rising on Wednesday on hopes of a deal and after the UK’s approval of a coronavirus vaccine, prices for both the US crude oil benchmark West Texas Intermediate (WTI) and Europe’s Brent North Sea were down slightly on Thursday at $45.13 and $48.15 respectively.
Thorny subjects
Markets were expecting producers to be able to agree on an extension of three to six months, with many viewing Monday’s meeting as a formality to sign it off. But a recent surge in crude prices-up by 25 percent over the course of November-together with positive news from several companies on coronavirus vaccines means some countries may need more convincing of the need for further sacrifices.
“It is unlikely that the strict implementation of the agreed cuts… will be achieved, which will undermine their effectiveness and confidence in the group,” according to Eugen Weinberg of Commerzbank. The cartel will also have to pay attention to developments in the three members which have been granted exemptions from quotas-Libya, Iran and Venezuela.
Libya’s production had been almost wiped out by civil conflict but has spiked since October and now stands at over one million bpd, according to the country’s National Oil Corporation (NOC). In the longer term, Iran’s offer on the oil market may also increase if the incoming US administration pursues a policy of detente with Tehran and relaxes sanctions. That would lead hundreds of thousands of barrels coming on to the market, exerting a fresh downward pressure on prices. – AFP