OPEC+ compliance could wane with oil demand recovery

Oil&Gas Materials 28 January 2021 09:55 (UTC +04:00)
OPEC+ compliance could wane with oil demand recovery

BAKU, Azerbaijan, Jan.28

By Leman Zeynalova - Trend:

OPEC+ compliance could wane with oil demand recovery, Trend quoted Wood Mackenzie vice president Ann-Louise Hittle as saying.

“On the supply side, all eyes will be on OPEC+’s plan to ease production restraint. The group was due to ease its production restraint by 2 million b/d to 5.8 million b/d as of January 2021. But that has been waylaid by a complicated agreement made in December to bring output back in increments to be decided at the start of each month, along with the February-March additional voluntary cuts by Saudi Arabia.

“We are assuming output gradually rises from April as the group obtains the planned 5.8 million b/d restraint level by Q3 2021. But OPEC+ decisions are a huge uncertainty for this year. Can OPEC+ negotiate deals each month and remain committed to production restraint? Some production restraint is needed in 2021 for market balance, but compliance could wane with demand recovery,” she said.

OPEC+ agreed to lift oil production by 75,000 barrels per day over January levels.

But Saudi Arabia’s late announcement after the meeting sent oil prices soaring—that Saudi Arabia would voluntarily cut an additional 1 million barrels per day in February and March above its current quota—all while OPEC’s allies get to ramp up production.

The OPEC+ agreed not only for the production levels for February but for March as well. March’s production level will see an additional increase of 120,000 barrels per day over February levels, or 195,000 bpd over January levels.

With March’s production quotas already set, the February meeting, therefore, will set production quotas for April. The previous meeting held in December adjusted the total production cuts to 7.2 million bpd for January, from 7.7 million bpd before.


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