Opec+ chalks plan to avoid taper tantrum

Saudi Oil Minister Prince Abdulaziz bin Salman likes the idea of Opec+ acting as the central bank of oil. And he expresses admiration for Alan Greenspan, former chairman of the US Federal Reserve.

The challenge now confronting the oil producers’ club is one that’s all too familiar to the Fed: how to avoid a “taper tantrum,” the market panic that ensued when the institution proposed tightening monetary policy in 2013. Having successfully doubled crude prices over the past few months through unprecedented output cuts, the Opec+ alliance led by the Saudis and Russia is poised to begin unwinding these stimulus measures. As fuel demand recovers with the lifting of coronavirus lockdowns, the producers are about to open the taps a little.a second wave of the pandemic threatens another slump in oil consumption, while the billion-barrel mountain of inventories that piled up during the first outbreak still looms. If Opec+ increases supply just as the market falters then prices could crash once again.

“When they look at prices over the quarter, when they look at green shoots of demand pick-up, I think they feel good,” said Helima Croft, head of commodity strategy at RBC Capital Markets LLC. “I do think they are cognisant though of some of the potential clouds on the horizon.”

It’s a balancing act that Prince Abdulaziz and his counterparts must weigh on July 15, when they hold an online meeting of the joint Ministerial monitoring committee, the panel that reviews Opec+’s progress.