OPEC+ considering rolling over output cuts into April, say sources

OPEC and other oil producers, a group known as OPEC+, are considering rolling over production cuts into April instead of raising output as oil demand recovery remains fragile due to the coronavirus, three OPEC+ sources told Reuters.

OPEC+ ministers hold a full meeting on Thursday.

The market has been expecting OPEC+ to ease production cuts by around 500,000 barrels per day (bpd) from April.

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OPEC leader Saudi Arabia has also been expected to end its voluntary production cut of an additional 1 million bpd.

But on Wednesday three OPEC+ sources said some key OPEC members have suggested keeping OPEC+ output unchanged.

It was not immediately clear whether Saudi Arabia would end its voluntary cuts or extend them, they said.

Oil prices jumped by about $1 per barrel on the news to trade near $64 per barrel.

On Tuesday, a document by OPEC+ experts, seen by Reuters, called for “cautious optimism” citing “the underlying uncertainties in the physical markets and macro sentiment, including risks from COVID-19 mutations that are still on the rise.”
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It said it believed a recent oil price rally might have been caused more by financial players rather than improvements in market fundamentals.

OPEC expects global oil demand in 2021 to grow by 5.8 million bpd to about 96 million bpd, yet remain lower than demand in 2019 which was about 100 million bpd.

Russia has been widely expected to push for more increases but in February it failed to raise output despite being allowed to do so by OPEC+ as harsh winter weather hit output at mature fields.

Having spoken to Denis Deryushkin, Russia’s representative at the OPEC+ technical committee, JP Morgan said Russia sees some rationale in raising output as the oil market is in a 500,000 bpd deficit.

“Russia believes that if output is maintained at current levels, the market would move into an even more severe deficit,” the bank said.

“As such, production needs to be restored, but the speed and amount are yet to be decided,” it added.

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