OPEC+ to continue talks for deal on February production

Cornelia Mascio
Gennaio 11, 2021

Analysts project for oil prices to be in a delicate balancing act to sustain the current uptrend as they continue to see many uncertainties surrounding oil's supply side.

Abuja - The Organisation of Petroleum Exporting Countries (OPEC) yesterday upheld its December 3, 2020 decision to increase crude oil production output by 500,000 barrels per day for February and March, 2021.

Earlier this week, Saudi Arabia, the world's biggest oil exporter, pledged a voluntary oil production cut of 1 million barrels per day beyond the required OPEC+ quotas in February and March.

US crude stocks dropped and fuel inventories rose, the Energy Information Administration said on Wednesday. The rebalancing of the annual commodity price index will also benefit oil prices.

Another concern for the market is high crude inventories in both floating and onshore storage, the outcome of the plunge in demand as the pandemic started to spread worldwide in March and April past year.

Bin Salman was reported to have held a telephone call in February with Putin that degenerated into a shouting match just before Riyadh made a decision to release the extra oil to the market. That more than offsets the combined 75,000 barrel-a-day increase Russian Federation and Kazakhstan will be allowed to make in each of those months. On the one hand, countries like Russian Federation were rooting for increased production before USA shale producers do.

"This week the Saudis stepped up to try to take over the market and took ownership of getting prices stabilised", said John Kilduff, partner at Again Capital in NY.

The price increase followed output cuts Saudi Arabia announced Tuesday.

The document also showed that Russian Federation and Saudi Arabia have a reference production of 11 million barrels per day respectively, but will only be allowed to pump 9.1 million bpd for the period under review.

Shale stocks surged on Tuesday, and prices of US crude futures for delivery in the rest of the year settled at their highest level since February. It was at $53.87 a barrel at 0536 GMT after jumping 4.9% on Tuesday.

The Saudi pledge, which Russia's deputy prime minister described as a "new year gift" to the oil market, comes as stay-at-home orders and travel restrictions are being extended to rein in a rampant virus.

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