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Opec-Plus Starts to Look Beyond Output Cuts

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Austria OPEC Meeting

Opec-plus is nearing decision time as its two-year-old production deal winds to a close — but the market will likely have to wait a while longer to see what comes next. At the next ministerial meeting on Jun. 30, the producer group is expected to continue reviewing market conditions. Altering policy for August is an option, but so far, delegates say that seems unlikely. Ministers will, however, start to focus on what new policy could be adopted from September, after existing cuts have run their course. Opec-plus at its last meeting decided to compress the unwinding of cuts into July and August, accelerating the timeline by one month. Also feeding into deliberations is the upcoming visit to Saudi Arabia of US President Joe Biden, scheduled for mid-July. As oil prices soared in recent months, Washington has exerted steady pressure on Opec-plus producers to release more oil to the market. Opec-plus, led by Saudi Arabia, eventually offered a modest olive branch with the acceleration. But Riyadh has been treading a fine line, pursuing a parallel priority of keeping Russia on board. Some US officials suggest the Biden visit may result in Saudi Arabia and other Gulf states increasing their production in collaboration with Opec-plus, but this is far from certain. Riyadh may have other asks beyond a thawing in relations, including a different tone from the Biden administration on the speed of the energy transition and encouraging more investment in the upstream sector. There’s also a broad understanding on both sides that global spare production capacity is limited and that using up remaining volumes could stoke rather than ease market concerns. In this context, Gulf states are keen to manage their limited spare capacity carefully to avoid upsetting either the market or their relationships with other Opec-plus producers.

Topics:
Opec/Opec-Plus, Opec-Plus Supply , Oil Inventories, Oil Supply
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