OPEC-JMMC meeting expected to conclude with oil production hike.
Oil prices in February celebrated Saudi Arabia’s voluntary cut of oil production in February and March by 1 million barrels-per-day (bpd), climbing to a 13-month high. However, oil prices started this month with a retracement just days before the OPEC-JMMC meeting. With oil prices rising back to the pre-Covid levels, the market was expecting Saudi Arabia to end its voluntary cut, with the OPEC potentially increasing production by up to 1.3 million bpd starting from April. Furthermore, the OPEC+ was expected to increase production by 500,000 bpd.
A surprise from OPEC+.
To the surprise of the market, Saudi Arabia held its 1 million bpd of voluntary oil production cut into April. Most of the OPEC+ members agreed to continue at the current production level except for Russia and Kazakhstan, where they will be allowed to increase production by 130,000 and 20,000 bpd respectively. As a result, oil prices soared.
Despite the progress made in the recovery of the oil market, the OPEC and its allies are well aware of the existing uncertainties surrounding the demand. The recent discovery of a new variant of the COVID-19 virus that led to the resumption of lockdown measures in certain parts of the world proved how the demand of oil can be easily impacted. Just two weeks before the March’s meeting, Saudi Arabia warned members of the oil alliance against complacency as uncertainty is very high and that extreme caution is necessary.
U.S. shale not a threat to oil prices.
For several months now, Russia has been trying to persuade Saudi Arabia to increase oil production, worrying that a continued rise in oil prices will impact its affordability, thus causing a switchover in demand from oil to U.S. shale. However, during the recent OPEC-JMMC meeting, Saudi Energy Minister Prince Abdulaziz bin Salman expressed confidence that the rise in oil prices now will not bring back the glory days of U.S. shale that transformed the global energy industry. If that is the case, the OPEC+ will be able to take oil prices to a higher level and take control of a major market share. However, if the Energy Minister is wrong about the U.S. shale, then the consequence of a reduced demand will potentially lead to a collapse in oil prices.
Oil prices in February celebrated Saudi Arabia’s voluntary cut of oil production in February and March by 1 million barrels-per-day (bpd), climbing to a 13-month high. However, oil prices started this month with a retracement just days before the OPEC-JMMC meeting. With oil prices rising back to the pre-Covid levels, the market was expecting Saudi Arabia to end its voluntary cut, with the OPEC potentially increasing production by up to 1.3 million bpd starting from April. Furthermore, the OPEC+ was expected to increase production by 500,000 bpd.
A surprise from OPEC+.
To the surprise of the market, Saudi Arabia held its 1 million bpd of voluntary oil production cut into April. Most of the OPEC+ members agreed to continue at the current production level except for Russia and Kazakhstan, where they will be allowed to increase production by 130,000 and 20,000 bpd respectively. As a result, oil prices soared.
Despite the progress made in the recovery of the oil market, the OPEC and its allies are well aware of the existing uncertainties surrounding the demand. The recent discovery of a new variant of the COVID-19 virus that led to the resumption of lockdown measures in certain parts of the world proved how the demand of oil can be easily impacted. Just two weeks before the March’s meeting, Saudi Arabia warned members of the oil alliance against complacency as uncertainty is very high and that extreme caution is necessary.
U.S. shale not a threat to oil prices.
For several months now, Russia has been trying to persuade Saudi Arabia to increase oil production, worrying that a continued rise in oil prices will impact its affordability, thus causing a switchover in demand from oil to U.S. shale. However, during the recent OPEC-JMMC meeting, Saudi Energy Minister Prince Abdulaziz bin Salman expressed confidence that the rise in oil prices now will not bring back the glory days of U.S. shale that transformed the global energy industry. If that is the case, the OPEC+ will be able to take oil prices to a higher level and take control of a major market share. However, if the Energy Minister is wrong about the U.S. shale, then the consequence of a reduced demand will potentially lead to a collapse in oil prices.