The Organization of Petroleum Exporting Countries and its non-OPEC partners (together forming OPEC+) will meet today via videoconference.
Expect persistent policy divergences between Saudi Arabia and Russia to dominate the discussion. Riyadh has asserted the importance of continuing rigid production cuts in order to maintain the momentum of an impressive price recovery. In February, the kingdom committed to an additional million barrels per day (bpd) in voluntary cuts. Moscow, however, has pushed for expanded production.
Despite Riyadh’s opposition, expect moderate production increases up to 500,000 bpd. Saudi Arabia’s cuts, traders’ willingness to employ commodities as a hedge against inflation, and improved demand outlook have eased price pressures. Thus, countries such as Russia and Kazakhstan have refocused on market share. The absence of a production increase risks heightening non-compliance to established quotas. Furthermore, the deep-freeze in Texas gutted US output, adding impetus to calls for increased production. Key importers such as India have also signaled growing unease regarding the sharp uptick in prices, arguing for easing supply restrictions. Thus, gradual modest upticks in output are likely over the medium-term. But owing to the fragile nature of both oil price and global economic recovery, significant hikes are unlikely.
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Sinan is an analyst for the Current Developments Team and a regular contributor to the Daily Brief. A student of transatlantic affairs, he specialises in political, economic and energy affairs of Europe and the Middle East.