Major oil producing countries scheduled to hold ministerial meeting on Monday to decide output from November onwards
The Organization of Petroleum Exporting Countries and allies, known as OPEC+, will have to balance factors which may affect the markets in the short term while also trying to minimize the risk of the adverse impact of high oil prices on demand, experts said ahead of a monthly meeting of the major oil producing countries.
On Monday, the OPEC+ members will discuss how much oil to release into the market, where supply interruptions and rebounding demand from the coronavirus outbreak pushed oil prices above $80 per barrel.
While the oil prices jumped to a three-year high in September and were pushed up further by record high gas prices, which have risen 300% due to supply shortages and low production of other fuels, the uncertainties around the monthly meeting of OPEC+ group are now exerting downward pressure on prices.
International benchmark Brent crude was trading at $78.77 per barrel at 0731GMT for a 0.64% decrease after closing Friday at $79.28 a barrel.
American benchmark West Texas Intermediate (WTI) was at $75.34 per barrel at the same time for a 0.71% drop after it ended the previous session at $75.88 a barrel.
In July, OPEC+ agreed to implement a monthly increase of 400,000 barrels per day (bpd) until April 2022, phasing down 5.8 million bpd of existing cuts. In their next meeting in September, the group did not make a policy and decided to stick to their decision.
However, the energy markets are now facing another crisis after suffering low oil demand last year due to the COVID-19 pandemic – this time due to falling supply and investors are keeping tabs on the upcoming OPEC+ meeting.
Supply concerns intensified after oil production in the US, the world’s largest oil-producing country, was disrupted by hurricanes that hit its southern coast in August. Concerns were exacerbated even further by underinvestment and ongoing technical problems in certain oil-producing countries, including Nigeria and Angola.
Carole Nakhle, chief executive officer of energy and geopolitical advice at research and training company Crystol Energy, said although OPEC+ is mostly expected to stick to the plan agreed in July, “Saudi Arabia may go the extra mile and display a gesture of ‘goodwill’ by putting unilaterally more oil in the market.”
“OPEC+ will have to balance between what could be a heating market in the short term, whereby it wants to minimize the risk of adverse impact of high prices on demand and different dynamics in the coming year, especially when additional supplies are expected to hit the market,” Nakhle said.
In early January, Saudi Arabia’s surprise decision had marked the OPEC+ meeting when it announced a two-month unilateral cut to its crude oil production for February and March in addition to its OPEC+ commitments.