Energy News Today

OPEC’s Saudi Arabia and Russia are at loggerheads once again

Saudi Minister of Energy Abdulaziz bin Salman (R) is pictured with his Russian counterpart Alexander Novak as they arrrive for a meeting of the Saudi-Russian Joint Committee on December 19, 2020.


LONDON — A group of some of the world’s most powerful oil producers will hold a crucial meeting on Thursday to discuss reversing some of the output cuts it made last year.

OPEC and its non-OPEC partners, an energy alliance sometimes referred to as OPEC+, will convene via videoconference in a bid to reach consensus over how to manage supply to the market.

The group last year agreed to restrict the amount of oil it produces in an effort to prop up oil prices as strict public health measures coincided with an unprecedented fuel demand shock.

This week’s supply decision comes at a time when oil prices have rebounded to pre-virus levels, production in the U.S. has taken a hit from freezing storms and the coronavirus pandemic continues to cloud the outlook.

OPEC’s de facto leader Saudi Arabia has publicly encouraged allied partners to remain “extremely cautious” on production policy, warning the group against complacency as it seeks to navigate the ongoing Covid-19 crisis.

Non-OPEC leader Russia, meanwhile, has indicated it wants to push ahead with a supply increase.

Analysts broadly expect OPEC+ to hike output from current levels, but questions remain over how much exactly and which countries will be affected.

At an industry event last month, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman reportedly said to those trying to foresee the energy alliance’s next move: “Don’t try to predict the unpredictable.”

Both Saudi and Russia ‘will get what they want’

OPEC+ not yet ready to switch course

International benchmark Brent crude futures traded at $63.01 a barrel on Tuesday morning, almost 1.1% lower, while U.S. West Texas Intermediate (WTI) crude futures stood at $60.02, down more than 1%.

Oil prices, having climbed to a 13-month peak last month, appeared to extend losses that began last week on expectations that OPEC+ may be set to increase global supply.

“Our expectation is that they are going to rise in line with their previous policy deal which was announced in December of 2020. And that is to not increase production more than 500,000 barrels per day. We expect that policy to still be valid,” Louise Dickson, analyst at Rystad Energy, told CNBC via telephone.

The logo of the Organization of the Petroleum Exporting Countries (OPEC) at the headquarters.

Omar Marques | LightRocket | Getty Images

She added that OPEC could, in theory, increase production by 1.3 million barrels per day, but “we don’t think they are going to overshoot this time around.”

“Russia will build up momentum in their market view, but we don’t see a complete switchover. For the last year, OPEC+ has been really firmly under the reins of Saudi Arabia, guiding the policy, making the calls, calling the shots, etc. And I don’t think that, after a year of such market and supply diligence, the group is ready to switch course just on a whim of $65 Brent or an increasingly tighter oil market,” she said.

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2021-03-02 02:21:00

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