On Thursday evening, OPEC+ agreed to gradually resume monthly production increases, an OPEC representative said. Kazakhstan’s energy minister said OPEC+ agreed to increase production by 350,000 bpd in May and June, and 450,000 bpd in July.
This is a bit different from what was revealed by previous sources. According to previous sources, OPEC+ discussed increasing production by 350,000 bpd in May, 350,000 bpd in June, and 400,000 bpd in July. The difference is that the production increase in July reached 450,000 bpd.
Under the OPEC+ agreement, Kazakhstan will be allowed to produce 1.463 million bpd of oil in May and 1.475 million bpd in June.
Earlier sources said Saudi Arabia is considering restoring 250,000 bpd of production from voluntary cuts in May and another 250,000 bpd in June.
NYMEX most active WTI Crude Oil main futures contract at 22:32 GMT on April 1 within one minute trading plate instantly traded 5663 lots, trading contracts worth a total of $340 million.
Both U.S. and Cloth oil broke the line down, with a short term cumulative drop of over $1.1; however, international oil prices recovered after OPEC representatives announced their agreement to gradually increase production.
At the beginning of the OPEC+ ministerial meeting, Saudi Energy Minister Abdul Aziz rate said that OPEC’s cautious attitude has proved to be correct, with the OPEC+ production cut implementation rate at 113%. The global recovery is far from complete and OPEC+ should remain cautious until the economic recovery becomes clear, while oil stocks continue to fall.
The pre-meeting Joint Ministerial Monitoring Committee (JMMC) recommended extending the overproduction compensation cuts until the end of September 2021, with oil stocks still above the 2015-2019 average despite ongoing de-stocking.
Russian Deputy Prime Minister Novak, contrary to the Saudi oil minister’s view, believes that the situation in the global oil market has improved.
The current supply gap in the oil market is about 2 million barrels per day and we see that the economy is recovering, which will be positive for global oil demand, which is expected to grow at a rate of 5-5.5 million barrels per day this year, and it is important not to let the market overheat or undersupply. Vaccination is progressing, but there is still a lot of uncertainty, especially in Europe. So we have to monitor the pace of vaccination and the status of the blockade in individual countries.
Iraq and Kazakhstan have submitted their plans for compensatory production cuts, sources said. The oil ministers of Nigeria, Oman and Angola are said to support extending the current size of the production cuts. Algeria’s energy minister supports extending the current scale of production cuts into May and June. Saudi Arabia also proposed a two-month extension of the current scale of production cuts.
Many OPEC watchers expect the current production level to be extended by at least one month, and any deviation from this expectation in the final decision could be negative for oil prices. OPEC+ had agreed to gradually increase production by up to 500,000 barrels per day per month last December, but suspended the plan in January due to concerns about demand conditions.
Goldman Sachs said after the OPEC+ meeting that oil supply shortages will accelerate, even if OPEC+ increases production. Goldman Sachs said on Friday it expects OPEC+ to leave May production unchanged when it meets today and expects to gradually increase production by 3.4 million barrels per day through September.
JPMorgan also previously said that OPEC+ is expected to remain cautious when it meets and will broadly extend production cuts into May, with Saudi Arabia extending its additional voluntary cuts by two months to the end of June. OPEC+ is expected to start increasing production at 500,000 bpd from June until August.
For his part, Giles Coghlan, an analyst at the financial website Forexlive, warned that four major reasons show that oil prices are facing headwinds.
First, low oil prices had been an opportunity to buy oil, but there is news that China’s oil reserves are nearing their ceiling.
Second, the dollar continues to strengthen, both in anticipation of rising interest rates and safe-haven inflows last week are strongly supporting the dollar, which is a headwind for oil.
Third, as oil prices rise, shale oil could come back online. If shale oil supply increases, this will be another major headwind for oil prices.
Fourth, the number of new crown cases in Europe continues to rise. With the re-imposition of the embargo in the Eurozone, the more cases there are, the less demand for oil. If oil prices remain low, OPEC may extend production cuts.
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