Opec+ agrees output hike from January

LONDON: On Thursday, the Organisation of the Petroleum Exporting Countries (Opec) and Russia agreed to a small rise in oil production by 500,000 barrels per day from January, but struggled to reach a consensus for the remainder of next year on a wider and longer-term policy, four Opec+ sources told Reuters.

The rise means that, relative to current cuts of 7.7 million bpd, Opec and Russia, a coalition known as Opec+, will move to slash supply by 7.2 million bpd, or seven percent of global output as of January.

The curbs are being introduced in the midst of a second Covid-19 surge to counter sluggish oil production.

It was originally thought that Opec+ would prolong the ongoing cuts until at least March.

But after expectations of swift acceptance of anti-virus vaccinations sparked an increase in oil prices at the end of November, some manufacturers began to challenge the need to maintain such a close leash on oil regulation, as advocated by Saudi Arabia, the leader of OPEC.

Russia, Iraq, Nigeria and the United Arab Emirates have all, to some degree, expressed interest in providing the market with more oil in 2021, Opec+ sources said.

Four sources from Opec+ said the community will now meet every month to settle on production policies after January and it is unlikely that monthly rises will reach 500,000 bpd.

 

Opec+ must strike a fine balance in driving up enough oil prices to sustain their budgets, but not to the degree that rival US demand increases. US industry continues to rise past $50 a barrel.

 

Monthly Opecs meetings would make market moves more unpredictable and difficult for US oil producers to hedge.

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Since the Organisation of the Petroleum Exporting Countries and Russia’s announcement, oil prices were little changed at about $48 a barrel.