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OPEC+ likely to reach compromise to delay increase in production

Oil&Gas Materials 1 December 2020 15:04 (UTC +04:00)
OPEC+ likely to reach compromise to delay increase in production

BAKU, Azerbaijan, Dec.1

By Leman Zeynalova – Trend:

Wood Mackenzie market analysis shows the stakes are high for OPEC+ if the group does not agree to continue current levels of production restraint in Q1 2021, Trend quotes Wood Mackenzie vice president Ann-Louise Hittle as saying.

“With the surge of coronavirus cases in Europe and the US, for example, the global demand recovery from the lows of spring 2020 has been slower than expected. On the supply side, Libya’s production has climbed about 700,000 b/d since September and is also a factor weighing on the market fundamentals.

“We would expect an oversupply of over 2 million b/d in the first quarter and that would increase in the second quarter. By contrast, a continuation of current output would lead to an oversupply of closer to just 800,000 b/d.

“Without a rollover of current production, downward pressure on oil prices would put Brent at risk to slide back towards US$40 per barrel after recent gains on news of a vaccine helped lift prices. Given these stakes, we believe the group is likely to reach a compromise to delay the increase in production for three months,” she said.

Abdelmadjid Attar, Algeria’s Minister of Energy and President of the OPEC Conference said at the 180th Meeting of the OPEC Conference, 30 November 2020 that next year, the global economy is forecast to return to growth, expanding by an estimated at 4.4 percent, and oil demand growth is expected to be high, in the tune of 6.1 mb/d.

“This brighter outlook for 2021 gives us a cautious optimism and is a clear indication that we are on the right path.

In this regard, OPEC continues to support the global oil market, in cooperation with its partner countries of the Declaration of Cooperation, which is now in its fourth year. When it has been signed in December 2016, no one would have imagined that DoC will last for 4 years, let alone be instrumental in coping with the biggest crisis that the oil market has faced since World War II,” he said.

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