LONDON (Reuters) – OPEC and other oil producers, a group known as OPEC+, are considering rolling over production cuts into April instead of raising output as a recovery in oil demand remains fragile due to the coronavirus crisis, three OPEC+ sources told Reuters.
OPEC+ ministers hold a full meeting on Thursday.
The market has been expecting OPEC+ to ease production cuts by around 500,000 barrels per day (bpd) from April.
OPEC leader Saudi Arabia has also been expected to end its voluntary production cut of an additional 1 million bpd.
But three OPEC+ sources said on Wednesday some key OPEC members had suggested keeping the group’s output unchanged.
A ministerial panel meeting ended on Wednesday without making any policy recommendations, two OPEC+ sources told Reuters.
It was not immediately clear whether Saudi Arabia would end its voluntary cuts or extend them, they said.
Oil prices jumped by about $1 per barrel on the news to trade near $64 per barrel.
On Tuesday, a document by OPEC+ experts, seen by Reuters, called for “cautious optimism”, citing “underlying uncertainties in the physical markets and macro sentiment, including risks from COVID-19 mutations that are still on the rise”.
It said a recent oil price rally might have been caused more by financial players than improvements in market fundamentals.
(Graphic: OPEC+ Supply Balances (Base Case): https://graphics.reuters.com/GLOBAL-OIL/xklvyoywbvg/chart.png)
OPEC expects global oil demand in 2021 to grow by 5.8 million bpd to about 96 million bpd. That would still be lower than demand in 2019, which was about 100 million bpd.
Russia has been widely expected to push for more increases. But in February it failed to raise output despite being allowed to do so by OPEC+ as harsh winter weather hit output at mature fields.
JP Morgan, which said it had spoken to Russia’s representative on the OPEC+ technical committee Denis Deryushkin, reported that Russia saw some rationale in raising output as the oil market was in a 500,000 bpd deficit.
(Graphic: OPEC+ compliance with oil production cuts: https://graphics.reuters.com/GLOBAL-OIL/rlgvdezdjpo/chart.png)
“Russia believes that if output is maintained at current levels, the market would move into an even more severe deficit,” the bank said. “As such, production needs to be restored, but the speed and amount are yet to be decided.”
(Graphic: OECD Commercial Oil Stocks: https://graphics.reuters.com/GLOBAL-OIL/nmovazaggpa/chart.png)
(Reporting by Rania El Gamal in Dubai, Ahmad Ghaddar and Alex Lawler in London, Olesya Astakhova and Vladimir Soldatkin in Moscow; Writing by Dmitry Zhdannikov; Editing by Edmund Blair, Jason Neely and Jan Harvey)
