OPEC+ Vows ‘Proactive’ Response to Precarious Oil Market
The OPEC+ alliance warned of a “precarious” outlook as a resurgent coronavirus pandemic hurts oil demand, dropping further hints about a potential change of policy next month.
Unless the coalition changes tack, it will add almost 2 million barrels a day from January. But increasingly traders have warned the market cannot absorb so much oil.
Without tipping their hand, Saudi Arabia and Russia showed their unity at an OPEC+ Joint Ministerial Monitoring Committee meeting on Monday. Their top oil officials, Prince Abdulaziz bin Salman and Alexander Novak, offered bearish views. The Saudi minister warned of an “uncertain” outlook for demand and called on OPEC+ to be “proactive.”
“We know for certain it’s uncertain,” he said as the steering group of OPEC+ ministers gathered virtually to analyze the market before a full meeting on Nov. 30-Dec. 1. “We have to be able to take measures to head off negative trends and developments -- to nip them in the bud.”
Crucially, the panel didn’t discuss if OPEC+ should press on with plans to taper output cuts next year, delegates said. It can change course if needed, something it did earlier this year when the alliance delayed an supply increase by one month. Crude prices have fallen since the officials spoke on Monday, with Brent down 1.2% this week to $42.40 a barrel. That suggests the market is already expecting the cartel to revise its plans.
The group will probably “postpone the planned production increase in early 2021 by a few months,” said Giovanni Staunovo, a London-based commodities analyst at UBS Group AG. The “best indicator” for that was Novak’s comments about the slow recovery in energy demand, he said.
Delegates at the next JMMC meeting on Nov. 17 will likely recommend that an output delay is announced at the full meeting two weeks later, according to UBS.