OPEC Plus coalition decides to increase its oil production

 

Members of the Organization of Petroleum Exporting Countries and their allies within the OPEC Plus alliance decided, on Thursday, to increase their production of black gold next month by less than a third of what observers had expected.

 

A statement published after the ministerial-level talks said that the participants "agreed to maintain production levels in March for the month of April, with the exception of Russia and Kazakhstan, and the two countries will be able to increase their supplies by 130 thousand and 20 thousand barrels per day respectively due to the continuing pace of seasonal consumption." .

 

The increase is much less than the estimates of observers, who expected it to reach 500 thousand barrels per day.

 

The member states of the Organization of Petroleum Exporting Countries (OPEC) and its partners outside the cartel decided last year about the decline in prices, as a result of the Covid-19 pandemic, to reduce production, and then returned and agreed to a gradual increase in production from January.

 

Currently, with the start of vaccination campaigns and the return of Chinese demand to pre-pandemic levels, Moscow wants to increase production, while Riyadh seeks to maintain the status quo.

 

During the meeting, prices rose by more than 5 percent on the back of speculation that the organization will maintain current production levels.

 

v A 'shaky' market

 

 

The Secretary-General of "OPEC" Mohamed Barkindo, on Tuesday, adopted a compromise solution by raising an "optimistic but cautious" position on the sidelines of a technical meeting of the organization.

 

Although the economic outlook was better, the speed of recovery in demand remains vulnerable to many factors, including the success of slow immunization campaigns in some places.

In its monthly report issued in mid-February, the International Energy Agency ruled that the rebalancing of the oil market remained "fragile" at the beginning of the year, warning of the spread of mutated versions of the Corona virus.

 

Russia and Kazakhstan were allowed to increase their production slightly during the first quarter of the year, while Saudi Arabia raised the surprise by reducing its production by an additional million barrels per day.

 

The 23 countries agreed, after two days of arduous negotiations during their first summit for the year 2021 in early January, to gradually increase production until March, skillfully using the basic paper in their hand which is controlling oil production when needed to fabricate what Stephen Ennis of the ACCI Institute describes as an "artificial crisis." Guarantee to support prices.

 

The OPEC Plus countries agreed to reduce their production by 7,125 million barrels per day in February, then 7.05 million barrels per day in March, which are significant cuts.

v A price war

Observers had expected that the group would agree to continue its policy of gradually increasing production, raising it by 500,000 barrels per day, to be re-pumped in April.

 

In addition to that, the million barrels, in part or in full, that Saudi Arabia could pump if it decided to abandon an additional production cut in February and March that it voluntarily took to facilitate the agreement and allow Russia and Kazakhstan to increase their production.

 

But reaching a consensus is not certain within the coalition, which witnessed during the same period last year, against the background of the beginning of the pandemic, disagreements that led to a short but intense price war.

 

The discussions are exacerbated by the many points of contention that exist within the alliance. Among the most prominent of these is the issue of members' respect for specific production quotas, which constitutes a guarantee of the seriousness and credibility of the agreement, an issue that is regularly raised in discussions and in US competition.

 

The possibility of returning Iranian production to the market in the event of the easing of US sanctions imposed on Tehran after Joe Biden's arrival at the White House casts a shadow on the fragile balance between supply and demand that the cartel and its allies monitor.

On the eve of the ministerial meeting, consultations took place Wednesday via video link between members of the Club of Producing Countries, within the committee to follow up the implementation of the production cut agreement, which now meets monthly. However, unlike the previous meeting held at the beginning of February, no press release was published upon its completion.