‘We are in a situation now where things change overnight’
OPEC+ is not certain about next year’s strategy
Despite a surge in oil prices amid news of COVID-19 vaccine breakthroughs, the market situation remains unstable. OPEC+ is likely to postpone a production hike, which was initially scheduled for January 2021.
The Joint Ministerial Monitoring Committee (JMMC) of OPEC and its allies didn’t give a firm recommendation on whether the alliance should proceed with a supply hike in January as scheduled, reports Bloomberg adding that the committee told the group to be vigilant and responsive to the needs of the oil market. The final decision is expected to be made at a full ministerial meeting on 30 November — 1 December.
Last month, President Vladimir Putin said that Russia was open to a delay. Since then, the short-term outlook has worsened, as some of the largest European economies have gone back into lockdown. Although crude prices surged to $45 per barrel last week fuelled by news of COVID-19 vaccine breakthroughs, they are still insufficient for many OPEC nations to cover their government spending. Besides, oil demand is likely to remain depressed for many months due to a slow rollout of vaccines.
“There is still a way to go before we reach the other side of the long-awaited pandemic tunnel,” said Saudi Minister of Energy Prince Abdulaziz bin Salman. He pointed out that good news about “was counterbalanced by a surge in cases in the second wave of infections” and additional supply from Libya.
Russian Deputy Prime Minister Alexander Novak was more optimistic saying that the world had a better understanding of how to fight the pandemic and new restrictions had a milder effect on demand. “We need to continue showing commitment to our obligations, taking into account today’s uncertainties and the market situation amid winter demand,” he said.
The JMMC concluded that global oil supply could exceed demand in 2021 by an average of 1,9 million bpd in case of the scheduled production hike and weak consumption. Nonetheless, the committee’s base-case scenario is that next year’s consumption will be higher than supply by 400,000 bpd. According to anonymous committee sources, deferring the increase by 3 or 6 months may result in a decline in global crude inventories of 900,000 or 1,4 million bpd respectively.
“We are in a situation now where things change overnight,” commented Prince Abdulaziz bin Salman after the meeting. He added that the situation was fluid, so it would be not professional to take a position at the moment.