OPEC+ extended its cuts until mid-year to avoid a global surplus and support.
According to statements from member states such as Saudi Arabia, the restrictions will remain in place until the end of June, theoretically at about 2 million barrels per day, or half of the promised production cuts. Russia has pledged to strengthen its role by focusing more on production cuts than exports.
Traders and analysts widely expect a postponement, arguing that it is necessary to offset the seasonal lull in world fuel consumption and the surge in production from several OPEC+ rivals, especially US shale drillers. The uncertainty of China's economic outlook has increased the need for caution.
The abundance of *** has stabilized international oil prices around $80 per barrel this year, despite the conflict in the Middle East disrupting shipping in the region. While this has given consumers some relief after years of inflation, it can be a bit low for many at the OPEC and its partners.
Fitch Ratings says Saudi Arabia needs more than $90 per barrel** because it spends billions of dollars on the economic transformation of future cities and sports tournaments. Its largest partner in the alliance, Russia, also seeks income.
Officially, the countries said that these latest production restrictions, which deepened last year's cuts, would be "gradually restored depending on market conditions" after the second quarter. Russian Deputy Prime Minister Alexander Novak said that Russia will pay more attention to the reduction of production in the next quarter. Russia has a unique exemption that divides its restrictive measures into the production and export of ** and refined products. This commitment is likely to satisfy the Saudis. Saudi Energy Minister Prince Abdulaziz bin Salman last year expressed disappointment that Russia did not agree to a production cut, which affects the global market balance more directly than export changes.
In April, Russia's production cuts will include 350,000 barrels per day and 1210,000 barrels of exports. In May, production will be cut by 400,000 barrels per day and exports will be cut by 710,000 barrels, while the June limit will come only from production.
Despite this, Russia and other members of the group have so far not fully fulfilled their commitments. Russia has only recently fully implemented the production cuts promised almost a year ago. In January, the country cut exports by about 300,000 barrels per day as agreed, but its commitment to limit shipments of refined fuel was unclear. Iraq and Kazakhstan collectively produced 100,000 barrels per day above their quotas in January, but pledged to improve compliance and even compensate for initial overproduction.
OPEC's decision to extend production restrictions into the second quarter is widely expected, but OPEC+ may face a tougher choice at its next meeting on June 1, when ministers will set policy for the second half of the year.
The International Energy Agency's (IEA) report in Paris indicated that OPEC+ will need to stick to production cuts throughout the year as global demand growth slows and the Americas soars.
Saad Rahim, chief economist at commodities trading giant Trafigura Group, told Bloomberg TV last week: "You don't want to bring ** back to the market too soon. ”
It was not clear whether all Member States would be willing to accept the policy. While Saudi Arabia has often urged members to exercise caution, its neighbor, the United Arab Emirates, has been keen to capitalize on recent investments in new capacity.
Some believe this won't be an issue as the increase in demand will allow the group to ease restrictions and add more barrels later this year. Paul Horsnell, Head of Commodities Research at Standard Chartered, said: "Overall market fundamentals have improved. OPEC can increase production without flooding world stocks". (Compiled by Xiao Chen).
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