Dubai/Moscow — Ministers from OPEC+ group of oil producers met on Thursday to decide whether to keep output steady or agree a modest increase, with Saudi Arabia and Russia saying a recovery in demand for crude remained fragile.
Saudi Energy Minister Prince Abdulaziz bin Salman and Deputy Prime Minister Alexander Novak, lynchpins in the OPEC+ group, have to decide with their allies whether a rally in oil prices is enough to warrant more supply or if uncertainty about the coronavirus crisis should encourage more caution.
With oil above $60 a barrel, some analysts have predicted the OPEC+ group of producers will increase production by about 500,000 barrels per day (bpd) and also expect Saudi Arabia to partially or fully end its voluntary reduction of 1 million bpd.
But three OPEC+ sources said on Wednesday some members of the Organization of the Petroleum Exporting Countries believed OPEC and its allies should keep output unchanged.
They said it was not immediately clear whether Saudi Arabia would end its voluntary cuts or extend them.
“The uncertainty surrounding the pace of recovery has not receded,” the Saudi minister said. “At the risk of sounding like a stuck record, I would once again urge caution and vigilance.”
Russia’s Novak echoed those comments saying the oil market had not fully recovery and new coronavirus infections were still creating uncertainty.
Russia has been insisting on raising output to avoid prices spiking any further and lending support to shale oil output from the United States, which is not part of OPEC+.
But in February Moscow failed to raise output, despite being allowed to do so by OPEC+, because harsh winter weather hit its production at mature fields.
JP Morgan cited Denis Deryushkin, Russia’s representative on the OPEC+ technical committee, as saying Moscow saw some rationale in raising output because the oil market was in a 500,000 bpd deficit.
A source familiar with Russian thinking said Moscow wanted to raise its output by 0.125 million bpd from April.
OPEC+ cut output by a record 9.7 million bpd last year as demand collapsed due to the pandemic. As of March, it is still withholding around 7 million bpd, about 7% of world demand. The voluntary Saudi cut brings the total withheld to around 8 million bpd.
Analysts from ING, MUFG and SEB all said on Thursday the market could easily absorb an increase of 1.0 million-1.5 million bpd from April and would need even more barrels in the second half of 2021 when economy recovers further from pandemic.
*Rania El Gamal, Ahmad Ghaddar & Alex Lawler, Olesya Astakhova & Vladimir Soldatkin; Writing: Dmitry Zhdannikov; Editing: David Goodman & Edmund Blair – Reuters