On Thursday, March 4, OPEC+, led by Saudi Arabia and Russia, held a ministerial meeting to decide on its oil production policy for April, and the market is widely expected to jointly increase production by at least 500,000 barrels per day, and their judgment on the current state of the oil market will also influence the price trend in the coming months.
At the opening of the videoconference, Saudi Energy Minister Prince Salman said, “At the risk of sounding like negotiations have stalled, I once again urge member states to remain cautious and vigilant” and to be “prepared” for possible emergencies I urge members again to remain cautious and vigilant” and to be “prepared” for possible contingencies.
Analysis says this is the latest signal that Saudi Arabia still wants to strictly limit oil production. The Saudi energy minister also made a very graphic analogy: “Before taking the next step, make sure the shimmer we see is not the headlights of an oncoming express train.”
Russian Deputy Prime Minister Novak acknowledged that the market has not yet fully returned and that there is much uncertainty ahead, with the core issue being the uncertainty of the spread of the new coronavirus, but he also reiterated his support for a limited production increase, i.e., “we are now in a better situation.
After the news was released, international oil prices narrowed intra-day gains from over 2% to more than 1%, with Brent falling back below $65 in the short term and U.S. oil WTI falling back below $62 at one point.
An hour later, however, according to media reports, OPEC+ representatives said Saudi Arabia is preparing to continue voluntary oil production cuts in April and May, with the size of the voluntary oil cut in April remaining at 1 million barrels per day. Despite Russia seeking to increase oil production under the agreement, OPEC+ is close to a consensus that it may keep its oil production policy unchanged in April, i.e. deciding not to increase production by 500,000 barrels per day in April.
International oil prices rose rapidly to 5%, the U.S. oil WTI short term broke through $ 63 and $ 64 two hurdles, back to the highest in 14 months; Brent successively above $ 66 and $ 67, rose to the highest since February 26, and close to the high since January last year. Oil prices have risen 25% so far this year.
Europe’s STOXX 600 oil and gas index rose 1.8%, setting a new intraday high. U.S. energy stocks rose in general, APA rose over 7.6%, EOG Resources rose over 6.1%, Marathon Oil rose 5.6%, ConocoPhillips rose over 5.3%, Cimarex Energy rose over 5.0%; U.S. Crude Oil Fund (USO) rose over 4.9%, U.S. Brent Crude Oil Fund (BNO) rose over 5.0%, XLE also rose over 3.8%.
Analysts say the OPEC+ decision will make this will leave the world facing a severe oil supply shortage, which will worsen in April without additional production increases. It just so happens that the economy will face higher energy costs at a Time of recovery.
Earlier, several mainstream media outlets said that the OPEC+ representatives they had contacted were also unclear about what the next oil policy direction would be. At Wednesday’s preliminary OPEC+ meeting, oil-producing countries revealed little wind of whether they would increase production.
Bloomberg reported that Saudi Arabia and Russia had held bilateral talks on Wednesday to seek consensus against a backdrop of Saudi Arabia urging caution and Russia’s desire to boost oil production. The exact outcome of the talks does not yet appear to be known.
During Asian trading on Thursday, Saudi Arabia and Russia were discussing a proposal to restore 1 million barrels of oil supply per day to the global market, according to the Wall Street Journal, which cited people familiar with the matter. The size of Saudi Arabia’s production cut was cut to 500,000 bpd from 1 million bpd in February and March, while the other OPEC+ members collectively increased production by a total of 500,000 bpd.
There was also a Reuters report this week that Saudi Arabia and Russia have also discussed an alternative scenario that would require OPEC+ to maintain the current status quo of production cuts without any production increases.
Saudi Arabia and Russia have almost always had very different opinions when it comes to production increase plans. Simply put, Saudi Arabia demands higher crude oil prices to maintain government spending, while Russia is concerned about cutting production for too long to stimulate the rise of the U.S. shale oil industry, as oil demand has recovered.
Recent Comments