OPEC members have a lot of dissatisfaction due to the delays of output increase that are caused by the pandemic, an oil watcher said.
“A couple of weeks ago, we were all thinking this was going to be a pretty routine meeting, it seemed like all the ducks were lined up in a row for a rollover of these … cuts,” said Herman Wang, S&P Global Platts’ Middle East and OPEC managing editor. “But now, we’re seeing some cracks in the foundation,” he said.
“We know that Iraq has long struggled with its quota, but them saying that they are tired of the one-size-fits-all approach, that’s quite striking, for them to say something that direct about OPEC’s management,” he said during an interview on CNBC’s “Capital Connection."
According to Wang, it is not typical for there to experience some “performance theater” ahead of such meetings, but that the “the stridence of some of these calls” became a surprise.
“A lot of dissatisfaction, a lot of fatigue among a lot of members with having put in these cuts for so long because of Covid,” Wang said. “And with these vaccines perhaps around the corner, some of these countries aren’t willing to maybe play ball for much longer.”
He mentioned reports about the United Arab Emirates, a “long-standing ally” of OPEC kingpin Saudi Arabia.
The UAE energy minister Suhail al-Mazrouei said in a statement to Reuters that the country is a “reliable” member of the alliance.
“That’s what’s partly making these talks just so contentious. It’s not just about the next three months, it’s really about the rest of the decade,” Wang said.
“There’s a case to be made for Saudi Arabia – they want higher oil prices, they see the need for collective action,” Wang explained. “Russia sees an advantage in maintaining these ties with OPEC+ and keeping these oil prices supported in the here and now. Is that still going to be the case 6 months from now, I don’t know.”
“I think these are tough questions that need to be asked, some discussions that are going on,” he said. “That’s really what’s coloring these talks and something we’re watching for.”
OPEC members to delay output hike
OPEC+ may delay output hike as it considers positive news on Covid-19 vaccine development.
The coalition will hold a two-day meeting Monday to discuss the next stage of its production policy.
A planned 2 million bpd January production ramp-up appears to face delay, based on market consensus, with analysts giving their insights on whether that would be for three months or six months.
Caroline Bain, chief commodities economist at Capital Economics, stressed that meetings on Monday and Tuesday would not unlock any surprises, saying an extension of the production cut is possible.
“We now think that the oil price (Brent) will stand at $60 per barrel by end-2021,” she said in a research note Friday, revising forecasts due to the encouraging vaccine trial data from pharma giants that could help reopen economies after the coronavirus crisis.
