Posted on Dec. 2020 at 19:14Updated Dec 3, 2019 2020 at 19:48
The negotiations started on Monday were more laborious than expected, but they ended up being successful. The thirteen OPEC member countries and their ten Russian-led allies agreed on Thursday night to increase their oil production only gradually early next year. Objective: to continue to support prices that are still fragile, while the second wave of the pandemic penalizes demand in Europe and the United States.
The 23 countries gathered Thursday afternoon by videoconference represent more than half of world production. Last spring, they agreed to impose voluntary restrictions unprecedented in the history of black gold: in total, some 10 million barrels a day were withdrawn from the market as of May 1. , the equivalent of 10% of world consumption.
These cuts were then lightened as demand picked up, stocks around the world began to decline, and prices, which had fallen to their lowest in April, regained some strength.
The agreement provided for a second reduction in quotas on January 1, 2021, with the group’s production expected to increase by two million barrels. This Thursday, the exporting countries finally felt that it was too early. The demand for fuel has returned to near normal levels in many Asian countries but is still depressed in the West and air transport is still in crisis.
Reconfinement penalizes consumption
In the United States, stocks of crude lying dormant in tanks are still 7% above their average of the last five years and the level of gasoline stocks rose last week. In Europe, fuel consumption is 12% lower than normal. “The containment measures put pressure on the oil market and penalize road fuels, even if it is not in the same proportions as during the first wave of Covid-19”, underlines Bjornar Tonhaugen, analyst at the firm Rystad Energy .
This is why the 23 exporting countries played it safe Thursday. Production will not increase by 2 million barrels in January, but only 500,000. Allied state ministers have agreed to meet again before deciding on further increases, which will not exceed half a million barrels per month at most.
The deal has not been easy to find as many countries are eager to produce more to replenish their public finances, which have been bloodless since the collapse of prices. This is the case with Iraq, OPEC’s second largest producer after Saudi Arabia, or even Nigeria. Unusually, the United Arab Emirates joined them this week in calling for a relaxation of quotas, opposing head-on to their Saudi ally.
“After a steady recovery over the past six months, we are now in a very delicate balancing act,” Kpler experts write in a note released Thursday ahead of the meeting. Any relaxation of quotas will have to correspond to a new growth in demand ”.
The deal was greeted with relief by the market, but half-heartedly, as the most likely scenario before the meeting was even more cautious: the 23 allies would have postponed any production hikes until the end of March. The barrel of Brent appreciated by 1.1% Thursday in the early evening, to 48.80 dollars. “This is not the nightmare scenario that the market feared, but it is not what it had hoped for weeks either,” said Paola Rodriguez Masiu, analyst at Rystad.