OPEC+ is expected to make a small increase in quotas

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OPEC+ committee makes on April oil quota recommendation ahead of March 4 meeting

A key OPEC+ advisory committee concluded its meeting March 3 with no official recommendation on April output levels, though delegates said Saudi Arabia continues to urge the oil producer coalition to be conservative and limit any rise in quotas.

Saudi Arabia, which co-chairs the Joint Ministerial Monitoring Committee with Russia, has made no official statement on its position, and the meeting, which was held the day before the entire alliance will convene online to hammer out a deal, was not open to the public.

“We have not made any recommendations. The discussion will continue tomorrow,” one delegate said, speaking on condition of anonymity. “The ministers had poker faces. We will see tomorrow what will be decided.”

Another said that some ministers were still preaching caution, but overall the committee meeting ended quickly with no substantive policy discussions.

The full OPEC+ meeting will start at 2 pm Vienna time (1300 GMT).

Several members are expected to push for a loosening of quotas, to take advantage of the oil market’s bull run, which has seen Dated Brent hit 13-month highs in recent days.

Under the current agreement, OPEC and nine allies are cutting a collective 7.2 million b/d of production – roughly 7% of pre-pandemic demand, which can be eased by up to 500,000 b/d each month.

Saudi Arabia has voluntarily instituted an extra 1 million b/d cut that expires at the end of March, and how much of that the kingdom intends to unwind will be a major focus of the meeting.

Many analysts say the market can absorb a combined 1.5 million b/d production rise from the alliance without causing oil prices to backslide, as the global economy appears to be rebounding from the pandemic, while rival US producers remain focused more on profitability than output growth.

But OPEC+ members likely will want to avoid spooking the market by releasing too much production too quickly.

A report prepared by an OPEC+ technical committee highlighted several potential pitfalls in the market ahead.

While the rollout of vaccine programs and financial stimulus packages has improved market sentiment, “the recent price recovery might be caused more by the increased activity of financial players than by improvement in physical fundamentals,” the report stated.

It also noted that upcoming seasonal refinery maintenance will put a damper on crude demand in the second quarter, and while crude benchmarks appear in an ideal backwardation for the producer group, many markets in refined products remain in contango, indicating ample near-term supply.

The committee “called for cautious optimism due to the underlying uncertainties in the physical markets and macro sentiment, including risks from more transmissible and contagious COVID-19 mutations that are still on the rise, the pace of vaccinations, and risks related to unemployment and trade restrictions.”
Source: Platts