Opec, allies to consider extension of output cuts amid falling demand
VIENNA: The Opec oil producers’ club and its allies will hold a virtual meeting on Monday and Tuesday to finalise an expected extension to production cuts as the coronavirus pandemic continues to weigh on global demand.
The meeting comes as the oil industry hopes to turn a page on a disastrous year which saw the cartel forced to adopt drastic cuts in response to the cratering of demand caused by the pandemic.
Member states want to avoid a repeat of the collapse in prices seen in April.
According to the deal reached in that month, the current cut of 7.7 million barrels per day (bpd) is meant to be eased to 5.8 million bpd as of January 2021, but most observers expect this to be extended by between three and six months. Key players within the grouping have hinted in recent weeks that such a move may be on the cards despite positive news on the development of vaccines against the virus by several pharmaceutical companies.
AstraZeneca, Pfizer/BioNTech and Moderna have all shared encouraging trial results from their candidate vaccines in recent weeks, providing a lifeline for the oil demand.
However, while the effects of a vaccine will play out over the longer term, Opec and its allies will be focused on supporting prices in the first and possibly the second quarter of 2021.
While an extension of the cuts is the most likely scenario, there is always the possibility of discord arising among the 23 countries involved.
The memory of the debacle of a meeting in March this year is still fresh, when Saudi Arabia and key ally Russia failed to reach agreement and spent the next month engaged in a fratricidal price war.