Oil-producing coalition OPEC+, led by Russia and Saudi Arabia, will likely delay its planned two million barrels per day January increase in output, according to market consensus.
The two-day meeting to discuss the next phase of its production policy started on Monday and, according to chief commodities economist at Capital Economics Caroline Bain, it won’t spring any surprises while an extension of the production cut is largely priced in.
“We now think that the oil price (Brent) will stand at $60 per barrel by end-2021,” she said in a research note, according to CNBC, while revising her forecast due to positive Covid vaccine news.
Many market watchers see both oil benchmarks (Brent and WTI) at, or around, $50 a barrel over the next year as global demand slowly builds up. The price of US WTI crude plunged into negative territory during the first wave of the pandemic as Saudi Arabia and Russia couldn’t agree a production deal.
Also on rt.com OPEC+ crude production cuts could be extended – PutinOPEC+ is planning to raise output by two million barrels per day (bpd) in January – about two percent of global consumption – after record supply cuts this year. In April, the group of oil producing nations agreed to the largest single output cut in history, but that reduction of 9.7 million barrels per day was subsequently scaled back to 7.7 million in August.
Bain and some other economists point out that OPEC+ will be keeping a keen eye on US shale producers, and would not like to see them significantly re-ramp production without increases of its own. Data showed the number of operating oil and natural gas rigs in the United States has risen for the fourth month in a row.
According to investment bank BCS Global Markets, there is substantial supply waiting in the wings from OPEC+ and “hyper-dynamic US shale producers itching to drill again.”
Also on rt.com Will the United Arab Emirates withdraw from OPEC?The bank’s oil and gas analyst Ron Smith said that “[Rig activity] was rising steadily this fall, even before oil began its most recent rally. We think that as oil prices head towards $50/bbl, a key inflection point may be crossed, accelerating US oil drilling activity and, with a small lag, oil production.”
Smith added: “We are watching OPEC+, which in turn is likely watching for any reaction from US shale producers.”
Both Brent and WTI were down over one percent on Monday, trading at $47.56 and $45.08 a barrel, respectively.
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