OPEC+ reaches compromise to modestly increase oil production
The Organization of Petroleum Exporting Countries (OPEC) and other oil-producing countries led by Russia, a group known as OPEC+, noting that COVID-19 continues to impact the global economy and oil demand recovery, reached a compromise during their meeting via videoconference on December 3 to modestly increase production in January.
“The Meeting reaffirmed the continued commitment of the participating producing countries in the Declaration of Cooperation (DoC) to a stable market, the mutual interest of producing nations, the efficient, economic and secure supply to consumers, and a fair return on invested capital,” OPEC said in a statement. Beginning in January 2021, DoC participating countries decided to voluntary adjust production by 500,000 barrels per day from 7.7 million barrels per day to 7.2 million barrels per day.
The participating countries also agreed to hold monthly OPEC and non-OPEC ministerial meetings starting January 2021 to assess market conditions and decide on further production adjustments for the following month, with further monthly adjustments being no more than 0.5 million barrels per day, the statement read.
The increase by 500,000 barrels per day comes while demand is still under pressure from the impact of the coronavirus pandemic. “Looking ahead, the Meeting emphasised that it was vital that DoC participants, and all major producers, remain fully committed to efforts aimed at balancing and stabilising the market. It noted that renewed lockdowns, due to more stringent COVID-19 containment measures, continue to impact the global economy and oil demand recovery, with prevailing uncertainties over the winter months,” OPEC said.
Russian Energy Minister Nikolai Shulginov attended the meeting. “The Meeting welcomed the new Russian Minister of Energy, HE Nikolai Shulginov,” OPEC said. However, Alexander Novak, who was promoted to the post of deputy prime minister, still remains a key liaison with OPEC. “The Meeting also expressed its deep appreciation and gratitude to HE Alexander Novak, Deputy Prime Minister of the Russian Federation, for his exemplary leadership as co-Chair of the ONOMM. The Meeting asked him to continue in this role and thanked him for his tireless efforts and strong support for the DoC during these extremely challenging times,” OPEC said.
OPEC and non-OPEC participating countries urged Saudi Arabia’s Minister of Energy Prince Abdulaziz bin Salman to continue in his role as Chair of the OPEC and non-OPEC Ministerial Meeting, OPEC said. Bin Salman had offered on November 30 to resign the chair. “Bin Salman accepted the offer to continue in his role as Chairman of the Meeting and vowed to vigorously pursue the sustainable oil market stability desired by both producers and consumers,” OPEC said.
OPEC+ was originally scheduled to gather on December 1, but that was delayed while members reportedly met privately to agree on what to do next. The recent news about several coronavirus vaccines has caused oil prices to climb to their highest levels since they crashed in April making an agreement to maintain production cuts increasingly difficult.
As prices rose, countries like the United Arab Emirates (UAE) and Iraq were less willing to restrain supplies.
