Oil producing countries grouped together under the OPEC+ alliance led by Saudi Arabia and Russia met on Thursday and were expected to agree to an extension to their current output cuts.
Their third ministerial meeting of 2021, being held via videoconference, got underway around 1300 GMT.
Saudi Energy Minister Abdulaziz bin Salman, the head of the alliance, laid the groundwork for remaining cautious and not increasing output in his opening remarks.
“The reality remains that the global picture is far from even, and the recovery is far from complete,” he said as quoted in a statement from his ministry.
“And until the evidence of the recovery is undeniable, we should maintain this cautious stance.”
Salman praised the OPEC+ alliance nations for more than fulfilling their commitments to restrain output.
Under its current agreement, the OPEC+ group — made up of the Organization of Petroleum Exporting Countries and its allies including Russia — is enforcing drastic cuts in production, meaning seven million barrels that could be shipped to markets every day are being left in the ground.
In addition, Saudi Arabia has volunteered to cut its own output by one million barrels per day (bpd) to help avoid oversupplying a market suffering from a collapse in demand due to the coronavirus pandemic.
Without the cuts, limited storage capacity could be saturated and prices — currently hovering around $60 per barrel — could fall.
Market analysts widely tip OPEC+ to roll over the production cuts for another month, especially as more nations are experiencing an upswing in Covid cases.
“The producer alliance is virtually guaranteed to extend current oil cuts into May,” according to Stephen Brennock of PVM, reflecting a widespread view among analysts.
“It may even go a step further and prolong supply curbs into June,” he added, with the possibility that Russia and Kazakhstan may be given some small leeway to increase output as happened earlier in the year.
Other analysts question if Saudi Arabia will continue to make its additional voluntary cuts.
Russia’s Deputy Prime Minister Alexander Novak was more optimistic in his opening comments.
“The evolution of the vaccination campaign is making progress and allows us to look towards the future with optimism, even if, of course, we shouldn’t forget that there remain many uncertainties ahead,” Novak was quoted as saying by Ria Novosti news agency.
“We also note that the economy continues to improve,” he added.
But with Europe returning to lockdown and infections sweeping through India, a country that until the pandemic was an important source of demand growth, experts are now seeing a slower recovery for the crude market.
The International Energy Agency (IEA) reflected this more downbeat outlook in forecasts contained in its last report this month.
It estimated that global demand could take another two years to get back to its pre-crisis levels.
Benchmark crude contracts Brent and WTI were both up nearly 2 percent as the OPEC meeting got underway.
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