OPEC+ agrees on oil output rise by 0.5 mln bpd from January

The OPEC+ group of leading oil producers has agreed to raise its oil output by 500,000 barrels per day (bpd) in January, the Energy Ministry of Kazakhstan said in a Thursday statement.

It also said that OPEC+ has agreed to meet each month starting from January to decide its policy.

The statement came after Kuwait oil ministry said that it suggested to the OPEC+ group, alongside Algeria and Azerbaijan, to gradually increase oil production with not more than 500,000 barrels per day (bpd) starting from January 2021, and that its suggestion gained full backing from the 23 OPEC+ countries, state news agency KUNA reported.

The suggestion also included extension of compensation period for non-compliance with production quotas to the first quarter of the next year, the statement from the oil ministry received by KUNA said.

Reports earlier on Thursday suggested that OPEC and Russia had agreed to a modest oil output increase from January by 500,000 barrels per day but failed to find a compromise on a broader and longer term policy for the rest of next year.

The increase means the Organization of the Petroleum Exporting Countries and Russia, a group known as OPEC+, would move to cutting production by 7.2 million bpd, or 7% of global demand from January, compared with current cuts of 7.7 million bpd.

The curbs are being implemented to tackle weak oil demand amid a second coronavirus wave.

OPEC+ had previously been expected to extend existing cuts until at least March.

But after hopes for a speedy approval of anti-virus vaccines spurred an oil price rally at the end of November, several producers started questioning the need to keep such a tight rein on oil policy, as advocated by OPEC leader Saudi Arabia.

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OPEC+ sources have said Russia, Iraq, Nigeria and the United Arab Emirates have all to a certain extent expressed interest in supplying the market with more oil in 2021.

Four OPEC+ sources said the group would now gather every month to decide on output policies beyond January and monthly increases are unlikely to exceed 500,000 bpd.

OPEC+ has to strike a delicate balance between pushing up oil prices enough to help their budgets but not by so much that rival US output surges. US shale production tends to climb above $50 a barrel.

Monthly meetings by OPEC+ will make price moves more volatile and complicate hedging by US oil producers.

Crude prices were little changed after the OPEC+ decision at around $48 a barrel. [O/R]

(By staff and Reuters)

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