On Tuesday, two sources said that the Organization of the Petroleum Exporting Countries (OPEC) and Russia are assessing the possibility of deeper oil supply cuts early in 2021 to help to strengthen the global oil market.
Starting January 1, OPEC and non-member oil producer countries (OPEC+) are scheduled to decrease its current oil output cuts of 7.7 million bpd by 2 million bpd.
However, the development of the energy market globally has prompted a new strategy. A source familiar with Russian thinking commented that OPEC+ would likely need to cut oil output deeper in the first quarter of next year.
Likewise, the OPEC source said that producers are currently exploring many options besides a rollover of the existing cuts. However, a deeper cut would be hard for the group as it would mean losing more market share to non-OPEC+ producers.
Algeria, the holder of the rotating OPEC presidency, has backed the extension of the existing supply. The country’s Energy Minister Abdelmadjid Attar stated that at the next OPEC+ meeting, from November 30 to December 1, the possibility of maintaining the current level of cuts into the first half of 2021 would be assessed.
In line with Algeria, Russia and Saudi Arabia are seen to be supporting the idea of output cut extension.
On the talks with representatives of Russian oil companies, Russian Energy Minister Alexander Novak talked about the possibility of maintaining rather than easing the output curbs, according to sources.
Saudi Energy Minister Prince Abdulaziz bin Salman commented that the group’s commitment to supporting the market is undoubted.
In line with the oil majors, some analysts predicted that the current situation with strengthened coronavirus restrictions in many parts of the world also plays a role in the group’s decision. JP Morgan last week expected OPEC+ to choose to postpone the increase in supply by a quarter.
