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OPEC and other Russian-led oil-producing countries, trying to gauge the strength of the global economy as the coronavirus continues to rage but with vaccines on the horizon, reached a compromise on Thursday to modestly increase production in January.
But talks have revealed tensions in the unwieldy group, known as OPEC Plus, which has been trying to manage the oil market since 2016. These tensions could make it more difficult for producers to stay on line with production targets. as the global economy recovers in the coming month.
Under the deal, members of the Organization of the Petroleum Exporting Countries along with Russia and other countries will increase production by 500,000 barrels per day in January and, potentially, by a similar amount in the following months. . The less than 1% increase in the global oil market comes as demand is still under pressure from the impact of the coronavirus pandemic.
The group will also hold monthly meetings to approve other adjustments.
The deal was a compromise between countries that wanted to make a much larger increase of two million barrels a day, which had been agreed at a previous meeting, and others, led by Saudi Arabia, who preferred to maintain current production cuts, according to estimates. to 7.7 million barrels per day, given the uncertainties associated with the pandemic.
Reaching a deal had been surprisingly difficult. Thursday’s meeting had been delayed by two days as officials struggled to reach consensus.
Recent news about the effectiveness of vaccines in warding off the coronavirus, which has pushed oil prices to their highest levels since their collapse in April, has likely made it more difficult to reach a deal. In response to these higher prices, some oil producers found it less necessary to keep supplies tight and wanted to increase pumping to try to offset nearly a year of dismal oil revenues.
“As prices rise, the will to restrict supplies decreases,” said Bhushan Bahree, executive director of IHS Markit, a research firm.
What is striking is that the United Arab Emirates, long Saudi Arabia’s closest ally, the de facto leader of OPEC, has proven difficult to bring together. Analysts say the emirates’ ambitious rulers are angered by several issues, including a tight quota that significantly limits their plans to dramatically increase oil production and Saudi-Russian dominance of oil decision-making in recent years.
Analysts, including Bahree, say the country, OPEC’s third-largest producer after Saudi Arabia and Iraq, may consider going its own way on oil.
“They don’t want to be sidelined and just be a follower,” said Amrita Sen, head of petroleum analysis at Energy Aspects, a market research firm.
Frustrated by the difficulty of forging a consensus, Prince Abdulaziz bin Salman, the Saudi oil minister and chairman of the OPEC Plus meetings, on Monday offered to step down as chairman of an influential committee that is paving the way for the group’s decisions.
According to an OPEC press release Thursday, oil producers urged him to continue leading the committee as well as OPEC Plus meetings, saying his efforts were “greatly appreciated”.
The prince has agreed to stay, according to the statement.
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