Officials from the Organization of the Petroleum Exporting Countries (OPEC), Russia and other countries, the group known as OPEC +, held an initial round of talks on Sunday before the start of formal discussions on Monday, but they have yet to agree on production policy for 2021.
OPEC + was scheduled to ease existing production cuts by two million barrels per day from January 2021, but the second Corona wave reduced fuel demand around the world, which caused a rethink of the issue among the group’s members.
Sources in OPEC + said that the group is currently considering extending the existing cuts of 7.7 million barrels per day, or about eight percent of global demand, to the first months of 2021, a position supported by Saudi Arabia, the largest OPEC producer and other major members of the group.
“It will not be an easy meeting. Some members are against extending production cuts and this makes it difficult,” the Iranian Oil Ministry’s Shana News Agency quoted Minister Begin Zanganeh as saying.
After the failure to reach consensus in the initial consultations on Sunday between ministers in key countries, including Saudi Arabia and Russia, sources said that the talks are now focused on extending the cuts three to four months or on a gradual increase in production from January. Russia supports a gradual increase.
Kremlin spokesman Dmitry Peskov said the differences between Russia and OPEC were not as big as they were in early 2020, when the disagreements led to a breakdown in the talks and a spike in production.
But Peskov said President Vladimir Putin does not intend to contact the Saudi leadership before the OPEC + meeting, although it was a move that had previously helped ease any disagreement.
OPEC + must strike a delicate balance between pushing prices up enough to help member state budgets but not so sharply as to raise competing US production. US shale oil production tends to rise when prices exceed $ 50 a barrel. In addition to the challenges within OPEC +, Moscow’s finances can withstand lower oil prices than Riyadh.
Deutsche Bank said that oil prices, which fell 0.5 percent to about 48 dollars a barrel by 1405 GMT, may fall by up to ten percent if OPEC does not extend the cuts.
Oil witnessed a rise last week, driven by hopes of finding a vaccine for the Corona virus and expectations of extending cuts.
“It is clear that the global deployment of vaccines will take time, and their impact will begin to appear significantly in the second half of 2021, probably,” said Algerian Energy Minister Abdel Majid Attar, the current OPEC president.
Speaking at the start of the meeting today, Monday, ahead of the OPEC + talks scheduled for tomorrow, oil demand will likely remain weak during the first quarter of 2021.
OPEC + data shows that even if the existing cuts are extended for three months, oil stocks in industrialized countries in 2021 will remain above the five-year average, a key criterion that OPEC + watches, but the surplus will shrink.
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