By Brai Odion-Esene, SW4 Insights for Mace News
WASHINGTON (MaceNews) – Next year will be an uncertain year for the oil market, but promises of a global economic rebound – fueled by the COVID-19 vaccine – persuaded the OPEC-plus group of major oil producing countries Thursday to ease oil production limits starting in January.
There was “a strong consensus” around this agreement, Saudi Arabia’s Minister of Energy Abdul Aziz bin Salman told reporters during a virtual press conference.
In its communique following the meeting, OPEC-plus – which includes Mexico and Russia – announced that beginning in January 2021, participating countries will collectively adjust production cuts from 7.7 million barrels per day to 7.2 million bpd, meaning an additional 500,000 bpd flowing into the oil market from January.
Beyond that, the group said signatories agreed – “in light of the current oil market fundamentals and the outlook for 2021” – to gradually increase oil output by 2 million bpd over the course of the year, based on market conditions.
“The road to recovery is long and bumpy …. However, there are signs of light at the end of the tunnel,” Algeria’s Energy Minister Abdelmadjid Attar said in a statement to start the meeting, noting forecasts for faster economic growth and higher oil demand next year. “This brighter outlook for 2021 gives us a cautious optimism and is a clear indication that we are on the right path,” he said.
Russia’s Energy Minister Alexander Novak told reporters that the pace of future oil production adjustments “should be dictated by the state of the market and prevailing market conditions”
“It will not be immediate, it will be a gradual return,” he insisted.
OPEC-plus also agreed to hold monthly OPEC and non-OPEC ministerial meetings starting January 2021 “to assess market conditions and decide on further production adjustments for the following month, with further monthly adjustments being no more than 0.5 million bpd.”
The statement noted that “renewed lockdowns, due to more stringent COVID-19 containment measures, continue to impact the global economy and oil demand recovery, with prevailing uncertainties over the winter months.”
Novak said regular meetings with be held at the beginning of each month to determine the size of the next adjustment to oil production levels, allowing for “more precise” decisions based on oil market demand and other factors.
“[Oil Production] Adjustment could be in any direction,” based on conditions – positive or negative – at the time of each meeting, he added.
Saudi Arabia’s Bin Salman said the goal is to “tweak whenever it is necessary, whenever it is possible.” He echoed Novak’s point that oil production could be adjusted up, down, or left unchanged at future meetings.
“It is all about addressing uncertainty” he added, pointing to the regular meetings held by central bankers to review monetary policy.
The Saudi minister stressed that the availability of the COVID-19 vaccine will also be essential to the recovery – especially in terms of ensuring as much of the general population as possible is vaccinated.
Until then, “We need to be in a cautious mode,” Bin Salman said, hence the group’s decision to retain flexibility regarding future changes to oil production policy.
—
Contact this reporter: brai@macenews.com.
Content may appear first or exclusively on the Mace News premium service. For real-time email delivery contact tony@macenews.com. Twitter headlines @macenewsmacro.