OPEC+ energy ministers ponder delay to extra oil supply ahead of key meeting

OPEC+ energy ministers ponder delay to extra oil supply ahead of key meeting
Some OPEC+ countries are keen to increase export levels as their economies suffer from the effect of pandemic lockdowns. (AFP file photo)
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Updated 29 November 2020

OPEC+ energy ministers ponder delay to extra oil supply ahead of key meeting

OPEC+ energy ministers ponder delay to extra oil supply ahead of key meeting
  • Rising oil prices would suggest greater demand in the global market

DUBAI: Energy ministers from the OPEC+ alliance of oil producers are considering whether or not to extend historic cuts to crude output for a further period, in view of global uncertainties about demand, as COVID-19 cases surge worldwide.

Policymakers from the 23 OPEC+ grouping - led by the two biggest producers Saudi Arabia and Russia - have been consulting ahead of a crucial full meeting of the Organization of Petroleum Exporting Countries this week to decide whether to put an extra two million barrels of oil per day back onto global markets from next month.

Trading experts said that a further extension of the current level of cuts - around 7.7m barrels per day - was likely in view of continuing uncertainty about the global economic outlook.

Mike Muller, head of Asian business for global crude trader Vitol, told a forum organized by the consultancy Gulf Intelligence: “The market consensus is that they will hold off on the full increase. The question is for how long - three or six months?”

Prince Abdulaziz Bin Salman, the energy minister of Saudi Arabia and chairman of the OPEC+ ministerial committee, has indicated his willingness to consider “tweaks” to the current schedule in view of economic uncertainties and fragile oil demand growth.

The OPEC+ policymakers’ calculations have been complicated by the recent strong rise in the price of crude. Brent, the global benchmark, enjoyed its third consecutive week of rising prices last week, standing at $48.27 per barrel.

Rising oil prices would suggest greater demand in the global market, and therefore less reason for OPEC+ to abandon the timetable for resumption of supply it agreed last April at the height of the crisis that saw some prices fall into negative territory.

On the other hand, some OPEC+ countries are keen to increase export levels as their economies suffer from the effect of pandemic lockdowns.

Nigeria has argued that the OPEC+ rules should take into account the economic situation in individual member countries, a view to which Saudi Arabia is believed to be opposed because it would open the way for other countries to claim “exceptional circumstances”, undermining OPEC+ unity and credibility.

Iraq, another producer which has had trouble meeting OPEC+ limits this year, gave OPEC+ a boost on Saturday as its oil minister, Ihsan Jabbar, was reported in local media as saying the country would fall in line with the current limits and not seek an exemption, for fear of the damage that might cause to oil prices.

The crucial factor in deciding the extension and its duration is the relationship between Saudi Arabia and Russia, who have acted in tandem since the volatility of last spring.

Russia’s preference is to extend the current cuts for three months, according to reports from Moscow ahead of the OPEC+ ministers’ meeting.


Market traders ready to ride ‘Biden bounce’

Market traders ready to ride ‘Biden bounce’
Updated 28 min 10 sec ago

Market traders ready to ride ‘Biden bounce’

Market traders ready to ride ‘Biden bounce’
  • "Biden moving into the White House could drive markets into a bull run more sharply than previous inaugurations," a financial expert says

DUBAI: Investors are expecting a “Biden bounce” in global markets following the inauguration on Wednesday of Joe Biden as the 46th US president.

“History teaches us that we can expect the markets to react favorably to the inauguration of a new US president — and this time around it is likely to be no different,” said Nigel Green, CEO of deVere Group, one of the world’s largest independent financial advisers, with over 80,000 clients and $12 billion under advisement.

“Indeed, Biden moving into the White House could drive markets into a bull run more sharply than previous inaugurations because it is hoped the incoming administration will bring stability and, possibly, a halt to the uncertainty following the fiercely contested election. 

“Investors will also be buoyed by the $1.9 trillion fiscal stimulus announced by Biden, the Federal Reserve’s willingness to support markets, the new president’s multilateral trade agenda and his plans for stepping up the vaccine rollout. All of this will encourage confidence and optimism,” Green said.

Mazen Al-Sudairi, head of research at Riyadh-based financial services company Al Rajhi Capital, agreed with the optimism regarding a “Biden bounce.”

“One of the important outcomes with Biden is stability in the market. But there is also the stimulus factor coupled with the vaccine that is giving an indication of recovery in the market. This perceived unity in the US will be healthy for the global and Saudi market,” he told Arab News.

However, Green said that investors should be cautious for three reasons: “First, a market rally is going to be difficult to sustain indefinitely due to the enormous economic scarring caused by the pandemic.

“The major long-term headwind is mass unemployment, which is hitting demand, growth and investment on Main Street and which, ultimately, will have to impact Wall Street.

“Second, the new administration will have policies that will have an effect on different sectors of the economy. There will be a readjustment period that needs to be taken into account.

“And, third, not all shares are created equal and stock markets are heavily unbalanced at the moment. A handful of sectors are bringing up entire indexes,” he said.