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Saudi Arabia is reportedly poised to extend current OPEC + production cuts through May and June and also continue to cut 1 million bpd in oil production unilaterally, according to an anonymous source who spoke to Reuters.
OPEC + has not significantly reduced oil production since January, when collective production increased by 500,000 bpd from 7.7 million bpd in December to 7.2 million bpd. Taking into account still weak global demand, OPEC + decided in January to give Russia and Kazakhstan small increases for February and March, keeping overall production unchanged.
Since then, the cartel has remained wary of any production shifts, as exempt OPEC members Libya and Iran continued to increase their production rates, while the pandemic situation in some key markets remained more dynamic. than the oil producers would have liked.
With some European countries further tightening movement restrictions amid another spike in infections and the United States also reporting higher rates of new infections despite accelerating vaccines, uncertainty about when oil demand will recover has increased. This is probably the main factor determining Saudi Arabia’s willingness to continue cutting at the current rate.
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“They don’t see strong enough demand yet and they want to prevent prices from falling,” the Reuters source told the news agency.
Yesterday, Reuters quoted another unidentified source as saying that Russia was also willing to support a further extension of the current cuts, but also wanted to secure approval for a moderate increase in its own production to respond to increased seasonal demand in the country.
The OPEC + joint ministerial committee will meet tomorrow to discuss production levels and the market situation before the oil ministers meeting on Friday. Even if the cartel ends up crushing the current cuts, prices may not be hit too hard. According to some, the merchants have already included the price of the renewal.
By Irina Slav for Oil.eu
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