Adedapo Adesanya
By Adedapo Adesanya
Members of the Organisation of the Petroleum Exporting Countries (OPEC) and their partners (OPEC+) will meet via videoconference on Monday, January 4 to decide on production levels for February, hoping to turn the corner on a difficult year.
The OPEC+ ministerial meeting comes after oil consumption tanked in 2020 due to the COVID-19 pandemic and a price war between Saudi Arabia and Russia, which saw oil prices fall to unprecedented lows.
Despite a pick up in prices towards the end of last year, the market levels for the black gold remain uncertain.
After their last summit, from November 30 – December 3, the OPEC+ members agreed to increase production by half a million barrels per day in January.
Also at that meeting, the members of the OPEC cartel, led by Saudi Arabia, and six allies led by Russia, agreed to meet at the beginning of each month in order to decide any adjustments to production volumes for the following month.
Russia and Saudi Arabia are respectively the second and third biggest oil producers in the world after the United States.
The decision illustrates OPEC’s desire to maintain a strong influence on the oil market and the gravity of the situation for crude producers last year.
Before the pandemic, OPEC members were content with two summits per year at the organisation’s headquarters in Vienna but had to meet on many occasions during the tumultuous year.
The two contracts of reference, Brent Crude and West Texas Intermediate (WTI) crude both ended the year around the $50 per barrel level, far lower than the prices seen at the start of 2020 but well up on the lows seen last year.
In March 2020, Russia and the Kingdom of Saudi Arabia embarked on a brief but intense oil price war which led prices to plummet.
On April 20, WTI crude collapsed to minus $40.32 per barrel — meaning producers paid buyers to take the oil off their hands while Brent went below $20 per barrel.
The climate between the two oil giants has eased since then, with the Russian and Saudi energy ministers meeting in mid-December in a display of unity.
It remains difficult, however, to predict how demand will go in 2021 as governments begin rolling out vaccination programmes against the coronavirus.
Last month, in its monthly OPEC report, the cartel predicted a slight rebound in the market while noting continued uncertainties, particularly in the transport sector.
Despite the cut down in supply by the OPEC+ countries, nations outside the system have a major impact on the oil market; principally the United States which is still producing 11 million barrels of crude per day.
Even within its ranks, OPEC will have to pay attention to developments in the three members which have been granted exemptions from quotas — Libya, Iran and Venezuela.
Libya’s production had been almost wiped out by conflict since the ousting of president Muammar al-Gaddafi in 2011 but has spiked since October after the signing of a ceasefire deal with production at over 1.2 million barrels per day now.
