OPEC+ deadlocked over raising oil output

LONDON/DUBA I/MOSCOW • OPEC+ will resume talks on Tuesday after reaching a deadlock over February oil output levels as Saudi Arabia argued against pumping more due to new lockdowns while Russia led calls for higher production citing recovering demand.

The unusual decision to push negotiations into a second day was taken after a three-hour debate in a virtual meeting of OPEC+, which groups OPEC and other producers including Russia. The talks are scheduled to resume at 3:30 p.m. Vienna time on Tuesday.

OPEC+ sources told Reuters that Russia and Kazakhstan had backed raising production while Iraq, Nigeria and the United Arab Emirates suggested holding output steady.

On Sunday OPEC secretary general Mohammad Barkindo had warned OPEC+ experts of downside risks facing the oil market.

On Monday, Saudi energy minister Prince Abdulaziz bin Salman said OPEC+ should be cautious despite a generally optimistic market environment as demand remains fragile and the new variant of coronavirus is unpredictable.

“In many parts of the world, where infection rates have increased worryingly, a new wave of lockdowns and restrictions are being put in place, which will inevitably impact the rate of economic recovery in those countries,” he said.

In the video conference, the initial negotiating position of Prince Abdulaziz was to reverse the 500,000 barrel-a-day production increase the group made this month, delegates said. 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, they said.

The new variant of coronavirus, reported in Britain last month, is spreading globally and U.K. Prime Minister Boris Johnson was scheduled to set out tougher lockdown rules on Monday.

With benchmark Brent oil futures holding above US$50 per barrel, OPEC+ took the opportunity to raise output this month as it looks to eventually ease cuts that stand at 7.2 million bpd.

OPEC+ producers have been curbing output to support prices and reduce oversupply since January 2017, with cuts reaching a record 9.7 million bpd in mid-2020 as COVID-19 hammered demand for gasoline and aviation fuel.

In previous meetings Saudi Arabia has repeatedly suggested a cautious approach to restoring output while non-OPEC member Russia has backed a speedier increase.

Brent futures settled US71 cents, or 1.4 per cent, lower at US$51.09 a barrel, while U.S. WTI crude fell US90 cents, or 1.9 per cent, to settle at US$47.62.