OPEC+ Leans Towards Extending Supply Cut

By Adedapo Adesanya

The Organisation of the Petroleum Exporting Countries (OPEC) and allies known as OPEC+ are leaning towards delaying next year’s planned increase in oil output.

This is to support the market during the second wave of COVID-19 and rising Libyan output despite a rise in prices, three sources close to OPEC+ have been reported to have said.

OPEC+ was due to raise output by 2 million barrels per day (bpd) in January, about 2 per cent of global consumption, as it moves to ease this year’s record supply cuts.

With demand weakening, OPEC+ has been considering delaying the increase.

It was noted that Russia is likely to agree on a rollover of current output for the first quarter if needed, adding that the country would prefer to decide later on extending for the second quarter.

The reason for this is because there are expectations that the commodity, which recently hit an eight-month high of $49 per barrel, could possibly drop back amid the second wave of the virus.

According to market analysts, this hasn’t changed OPEC+ thinking around the extension because the increase in prices is about sentiments, noting that the best choice to solidify the market is through the three-month extension.

Still, enthusiasm for extended cuts is not universal, delegates and analysts say.

A potential complication is the United Arab Emirates’ wish for a higher OPEC+ quota like Nigeria, though Iraq is pushing for an exemption from 2021.

There are several technical meetings this week to prepare the ground for ministerial gatherings next week Monday, November 30 and Tuesday, December 1, 2020.

Last week, the Joint Ministerial Monitoring Committee (JMMC) in a meeting did not publicly announce what recommendation they would give to the full OPEC and OPEC+ meetings next week, which has stirred some anxiety.

OPEC faces a difficult time as it has taken upon itself to help to rebalance the market on the one hand, while on the other hand, it aims to secure as high oil income and market share in the medium term as possible.