SULAIMANI (ESTA) — OPEC and allies including Russia are leaning towards delaying next year’s planned increase in oil production to support the market during the second wave of coronavirus and rising Libyan output, Reuters cited three sources close to OPEC+ as saying.
A source familiar with the issue told Reuters that Russia is likely to agree on a rollover of current output for the first quarter if needed and would prefer to decide later on extending for the second quarter.
“It looks like the extension is needed,” Reuters quoted the source as saying, citing “possible price drops and demand uncertainties” amid the second wave of the virus.
OPEC+ was due to raise output by 2 million barrels per day (bpd) in January – about 2% of global consumption – as it moves to ease this year’s record supply cuts. With demand weakening, OPEC+ has been considering delaying the increase.
Oil has rallied in the past week, rising to its highest since March near $49 a barrel on hopes that COVID-19 vaccines will lead to higher demand.
“This increase in prices is about sentiment, but we need to extend to have solid market fundamentals to support the prices,” one of the sources said. “So far, the best choice is the three-month extension.”
A potential complication is the United Arab Emirates’ wish for a higher OPEC+ quota, according to Goldman Sachs.
Nigeria also wants a higher quota, and Iraq has talked about being exempt from 2021 reductions.
But Goldman said it did not expect such a push from the UAE to derail the extension, and Iraq has said it will support any unanimous OPEC+ decision.
There are several technical meetings this week to prepare the ground for ministerial gatherings on Monday and Tuesday. All meetings are virtual due to the pandemic.
