The decision surprised many market observers who expected the current situation to continue. But, a sign of a possible global economic recovery, the oil-producing countries bound by the OPEC + agreement – led by Saudi Arabia and Russia – decided, Thursday 1er April, to gradually open the floodgates, and gradually lighten their black gold production cuts.
The Organization of the Petroleum Exporting Countries (OPEC) and its ten allies will increase the volume by 350,000 barrels per day in May and June, then by 441,000 barrels in July, said the Saudi minister of energy and head of Alliance leader Abdelaziz ben Salman at a press conference following the meeting. This conclusion is the result of three hours of closed-door negotiations.
The club of twenty-three producers leaves some seven million barrels underground every day and adjusts this volume month after month. The goal is not to flood the market with black gold that it cannot absorb due to the economic damage from the Covid-19 pandemic. Without such a strategy, the risks of saturation of limited storage capacities and of falling prices, recovering to around $ 60 per barrel (approximately € 51) but still fragile, are very real.
To this common cut is added a million slashed by Riyadh since February and which will also gradually return to the market, by stages over the period, detailed Abdelaziz ben Salman.
Ambient optimism …
The cartel welcomes “Market improvements supported by vaccination programs” in the world and “Stimulus policies in key economies”. Without departing from its “Caution” in front of “The volatility observed in recent weeks”.
As a preamble, the Saudi leader compared the current situation of the crude market to a ” turbulent sea “. But he also noted encouraging signals from the demand side and highlighted the “Flexibility” that the alliance policy framework allows.
“Today we have much more positive figures, both in terms of reserves which have fallen considerably and in terms of the increase in demand”Russian Deputy Prime Minister Alexander Novak, in charge of energy, explained to the Rossiya 24 television channel. “Although there are uncertainties, we are optimistic for the future”, he summed up.
… but fragile situation
But the situation remains fragile for crude oil producers. In its last report in mid-March, the International Energy Agency (IEA) delivered grim estimates: after the health shock, world oil demand should take two years to return to pre-crisis levels, according to his prognosis.
Crown Prince Mohammed bin Salman (MBS) also spoke on the phone with Russian President Vladimir Putin before the meeting, the Kremlin said, referring especially to the two countries’ initiatives in terms of sustainable development.
Discussions also took place on Wednesday between the Saudi side and US Energy Minister Jennifer Granholm, according to a tweet from the latter. Not a member of the agreement, the United States nonetheless remains the leading producers of crude in the world with eleven million barrels produced every day.
Feverish throughout the day, benchmark crude prices rose sharply at the end of the meeting, with European Brent temporarily exceeding $ 65 per barrel.
“The great news is that OPEC + is still showing restraint in the very short term”, said John Kilduff of Again Capital. The ministers also agreed to meet again at the end of the month, on April 28.