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The Organization of the Petroleum Exporting Countries and its allies, including Russia, are expected to meet by videoconference on Thursday to consider a potential but by no means certain production increase of as much as 1.5 million barrels a day.
Analysts say the combined group, called OPEC Plus, could increase the supply of oil without undermining its price on global markets. After collapsing last spring, oil prices have risen to pre-pandemic levels in recent weeks, with Brent crude reaching nearly $67 a barrel in late February.
Vaccination programs against the coronavirus are gathering pace, potentially leading to increased economic activity and greater demand for oil this year. In addition, production growth from shale producers in the United States is expected to be restrained this year.
Petroleum heavyweights that are curtailing production, like Russia and the United Arab Emirates, would like to put some of that oil back on the market. On the other hand, Saudi Arabia, OPEC’s de facto leader, continues to urge caution while apparently seeking even higher prices.
After January’s OPEC meeting, Saudi Arabia voluntarily agreed to cut its own production by one million barrels a day, to about 8.1 million barrels a day. That cut is scheduled to expire in April, and it remains uncertain what the Saudis will do. Prince Abdulaziz bin Salman, the Saudi oil minister, clearly enjoys surprising the market and upending what he thinks are traders’ expectations.
On Wednesday, a preparatory technical committee meeting did not produce a formal recommendation, analysts say.
“Once again, it seems that Russia and U.A.E. are pressing for a collective OPEC Plus increase, while Saudi Arabia and Algeria are seeking to keep output unchanged for the time being,” wrote Helima Croft, an analyst at RBC Capital Markets, an investment bank, in a note to clients.
In January, OPEC Plus reached an unusual compromise that allowed modest increases to Russia and Kazakhstan that were offset by the substantial cuts that Saudi Arabia volunteered after the meeting.
The outcome of the meeting on Thursday may depend once again on how much production the Saudis are willing to sacrifice to gain higher prices.
