Oil: towards an OPEC+ status quo

Status quo in sight…

Photo credit © TotalEnergies

(Boursier.com) — Status quo in sight. OPEC+ delegates expect the Ministerial Advisory Committee to recommend keeping oil production levels unchanged at the next cartel meeting amid a tepid recovery in global demand. Saudi Arabia and its partners will conduct a review of production levels on February 1, after agreeing deep cuts late last year to keep global markets balanced. Cartel delegates privately told ‘Bloomberg’ they are betting on a status quo from the Ministerial Committee, pending clarification on the recovery of consumption in China and the impact of sanctions on Russian supply.

“OPEC+ looks increasingly likely to keep production levels unchanged even after the scheduled meeting,” Eurasia Group analyst Raad Alkadiri told the agency. “Prices have firmed, supply remains tight and significant levels of uncertainty prevail for both supply and demand.”

OPEC Secretary General Haitham Al-Ghais said earlier this month he was “cautiously optimistic” on the global economy as China’s nascent rebound is tempered by weakness in advanced economies. Saudi Energy Minister Prince Abdulaziz bin Salman insisted last month that OPEC+ would be “proactive and preventive” to keep markets balanced. “All signs indicate that Saudi Arabia is looking to stick to the preemptive policy for now and keep production constraints in place until there are clear indications that there are enough demand for additional supply,” said Helima Croft, head of commodities strategy at RBC Capital.

Goldman Sachs Group and Energy Aspects analysts believe that OPEC+ will end its supply cuts – officially around 2 million barrels per day – and start opening the floodgates again in the second half of the year, when the acceleration of the demand will tighten the market.

Up slightly on Tuesday, the barrel of Brent is moving close to $90.

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