- OPEC+ adjourns meeting until Jan. 5 with no deal yet on February oil quotas: delegates
OPEC and its partners will extend their talks to Jan. 5, with countries still at loggerheads over February production levels but hoping to avoid the brinkmanship of last spring when the pact briefly collapsed, crashing oil prices.
A full day of negotiations, including first a ministerial monitoring committee meeting, followed by the full OPEC+ conference, failed to budge Russia off its position that the coalition should increase crude production by 500,000 b/d in February to reclaim market share lost to the coronavirus pandemic.
The vast majority of members were in favor of rolling over January quotas, wary of the slow ramp-up of vaccines and the scrambling by many countries to get skyrocketing infection rates under control with renewed lockdown measures, delegates said.
The meeting will resume at 3:30 pm Vienna time (1430 GMT).
Iranian oil minister Bijan Zanganeh said the producer coalition had debated "two proposals 180 degrees opposite each other," according to state media.
“Views are different," he told oil ministry news service Shana during a break in the talks. "Some like Russia. .. pay more attention to the market share. For some, it seems, price is very important."
ICE Brent futures were trading at $51.00/b at 1930 GMT after the meeting extension was announced.
That is comfortably within Russia’s acceptable range of $45-$55/b, leading the country to argue that the market could absorb additional volumes of crude.
But other countries, led by Saudi Arabia, were focused more on the weak demand outlook and wanted to bide more time at current production levels.
Saudi energy minister Prince Abdulaziz bin Salman opened the meeting with a stark warning to his OPEC+ counterparts to stay disciplined with their crude production or risk upending the oil market’s recovery fostered by their historic output cuts since May.
“Now as we see light at the end of the tunnel, we must avoid at all costs the temptation to slacken off our cause,” he said. “Do not put at risk all we have achieved for an instant illusionary benefit.”
Russian Deputy Prime Minister Alexander Novak, his country's primary OPEC+ envoy, acknowledged the uncertainty in the global economy but said he is looking forward to a full oil market recovery in 2021.
“I hope that we will gradually, using different instruments and mechanisms, take the correct decisions to balance the market,” Novak said in his opening remarks.
In an earlier interview with Russian business channel RBC, Novak said oil demand was still 6 million to 7 million b/d below pre-pandemic levels but that the oil market's prospects had much improved in recent months.
"Now the situation is more defined than it was in the second quarter," he said. "Vaccinations have begun. If all develops positively and population mobility improves, in motor vehicles, air travel, then we will look even more optimistically at the market. I hope that sometime in 2021 demand will return to close to the level it was at before the crisis."
Deciding when to taper
The OPEC+ group, which controls roughly half of global crude production capacity, has relaxed its collective production cuts from 7.7 million b/d to 7.2 million b/d in January.
Ultimately, the goal is to get the cuts down to 5.8 million b/d by mid-year, in up to 500,000 b/d monthly increments, as market conditions warrant.
The alliance’s path through the pandemic has not been easy.
A similar dispute in March between Russia and Saudi Arabia over production policy as the coronavirus was beginning to spread worldwide led to a bruising month-long price war that exacerbated the market crash.
The two sides patched things up in April to implement record production cuts that have been largely credited with rescuing oil prices and have been gradually tapered.
Another difficult meeting in December that also involved postponements and extensions of talks, with Russia and the UAE seeking to boost production and Saudi Arabia arguing in favor of holding the line, resulted in the current agreement, where ministers are convening virtually every month to decide on subsequent quotas.
Russia’s obstinance is notable given that it has breached its quota several times over the past few months.
As of the end of November, it had overproduced its cap by a cumulative 609,000 b/d, most in the coalition, according to an internal OPEC+ document seen by S&P Global Platts.
Other OPEC+ members have largely given Russia a pass on its quota violations, conscious that the country’s status as one of the world’s top three oil producers lent the coalition market heft.
The alliance is hoping that a night of reflection and another day of talks will once again patch up their differences.