Talks resume as deal eludes Opec+

Russian supply hike proposal rejected

Opec+ was to gather again yesterday, following an unexpected suspension of talks on Monday when a majority of members, including Saudi Arabia, opposed Russia’s proposal for a February supply hike.

Ministers need more time to resolve differences over how much extra oil the market can take as the accelerating coronavirus pandemic leads to tighter lockdowns.

The extension of the negotiations casts doubt on the production increase of 500,000 barrels a day the market had been expecting for February. It also calls into question similar supply boosts traders had penciled in for March and April.

Differences of opinion between Saudi Arabia and Russia, the two de facto leaders of Opec+, can make for tricky meetings.

While Moscow appeared to be outnumbered on this occasion, the group typically requires a consensus among all members before concluding talks. Failure to reach a compromise is rare but can have damaging consequences, notably last year’s monthlong price war.

“Before ministers gather again at 3.30 p.m. Vienna time, they will have the chance to hold bilateral talks and consult with their home governments,’’ delegates said.

In Monday’s video conference, the initial positions of Moscow and Riyadh were diametrically opposed.

Saudi Energy Minister Prince Abdulaziz bin Salman proposed rolling back the 500,000 barrel-a-day production increase the group made this month, delegates said. Russian Deputy Prime Minister Alexander Novak wanted to maintain that supply hike and add the same again in February.

In his opening remarks, Prince Abdulaziz highlighted the risks to the oil market from a more infectious strain of the coronavirus, which has heightened the economic risks even as the roll-out of vaccines has buoyed prices.

“At the risk of being seen as a killjoy in the proceedings, I want to urge caution,” he said. “The new variant of the virus is a worrying and unpredictable development.”

The prince, who has consistently sought to keep a tight rein on supply, also indicated he would accept rolling over current output levels into February, delegates said.

Algeria, Nigeria, Oman, Iraq, Kuwait and the United Arab Emirates were also in favour of holding supply steady, they said, asking not to be named because the meeting was private. Kazakhstan supported Novak’s position.

“Crude could stabilise above $50 a barrel in the first half of the year if Opec+ makes the right decision,’’ Algeria’s Oil Minister Abdelmajid Attar told state news agency APS yesterday.

The Organization of Petroleum Exporting Countries and its allies are currently idling 7.2 million barrels a day, or about 7% of world supplies, and had planned to return a further 1.5 million barrels a day in installments over the coming months.

The group is already taking a cautious approach, agreeing in December to meet every month — rather than just a few times a year — in order to finetune production levels more precisely and avoid capsizing the price recovery they spent most of 2020 working to achieve.

Other prominent voices from the alliance have echoed Prince Abdulaziz’s caution. “There’s a need to be wary of the repercussions of the second wave of the pandemic,” staterun Kuwait News Agency reported on Monday, citing a statement from Oil Minister Mohammed Alfares.

Opec Secretary-General Mohammad Barkindo said at Sunday’s preparatory meeting that “there are still many downside risks to juggle.”