OPEC+ signals readiness to act on oil output cuts

VIENNA: Members of the OPEC+ club of oil producers agreed on Tuesday that they had to be ready to act on output cuts in order to prevent another slump in prices.

A joint statement issued after the monthly meeting said: “All participating countries need to be vigilant, proactive and be prepared to act, when necessary, to the requirements of the market”.

Earlier Prince Abdulaziz bin Salman, energy minister of OPEC kingpin Saudi Arabia, had said in a live-streamed address ahead of the OPEC+ meeting that the group “must be ready to tweak the terms of our agreement if need be.”

OPEC+ comprises the OPEC oil cartel member countries as well as allies such as Russia. “Flexibility and pro-activeness must continue to be the guiding principles of our deliberations today and in the future,” Prince Abdulaziz added.

The alliance is currently sticking to deep cuts to production agreed in April in order to protect prices from a fall similar to that seen when global demand collapsed in the wake of the first wave of the coronavirus pandemic.

According to the deal currently in force, the current reduction in output of 7.7 million barrels per day (bpd) is due to be tapered to 5.8 million bpd as of January 2021. Despite the lifeline for the market represented by encouraging news on several coronavirus vaccines, many market watchers expect the January date to shifted back by three to six months as the world economy and oil demand remain weak.

The delay would be signed off at the next full meeting of the group on November 30 and December 1. The joint statement issued after Tuesday’s meeting noted the positive news on vaccines and robust demand in Asia but said “these developments have been overshadowed by the resurgence of Covid-19 cases in major economies”.

“More stringent Covid-19 containment measures across continents, including full lockdowns, are impacting the oil demand rebound,” the statement said, adding that “the underlying risks and uncertainties remain high”.

The return of production from the oilfields of Libya—to the tune of a million barrels a day according to Libya’s National Oil Corporation (NOC) — has added further downward pressure on prices.

The conflict-plagued state had, like Venezuela and Iran, agreed exemptions from the cuts. Prince Abdulaziz congratulated fellow OPEC+ members on their achievements in hitting the targets for cuts thus far. “We achieved 99.5 per cent of what we set out to do,” he said, while reminding other countries that “we must maintain high compliance”.