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OPEC and its allies could “tweak” their supply accord beyond analyst expectations, Saudi energy minister Prince Abdulaziz bin Salman said Nov. 9, as speculation swirls on how the coalition will set its 2021 production quotas.
Emphasizing that the OPEC+ alliance will maintain flexibility, the prince said ministers have several options they are considering.
“We could… tweak this agreement subject to what we see in the future,” Prince Abdulaziz said at the ADIPEC virtual conference. “It could be a tweak even beyond what the so-called analysts are talking about. We are seeing how things evolve.”
The market appears to be largely expecting the producer group, which meets Nov. 30-Dec. 1, to extend its current 7.7 million b/d in output cuts through at least the first few months of 2021, instead of tapering them to 5.8 million b/d as currently scheduled.
Delegates have told S&P Global Platts that the cuts could even be deepened, though achieving unanimous agreement on this would be politically difficult.
Surging production from Libya and a stalling recovery in global oil demand have made the market rebalancing a bigger challenge than anticipated, OPEC+ officials have acknowledged.
Pavel Sorokin, Russia’s deputy energy minister, said he expects global oil demand will take two to three years to recover to pre-crisis levels of 100 million b/d.
“We all have to be sensible,” said Sorokin, who was standing in for minister Alexander Novak following Novak’s nomination to be deputy prime minister earlier Nov. 9. Russia is the largest non-OPEC producer cooperating with OPEC on its output cuts.
UAE energy minister Suhail al-Mazrouei also reiterated that the OPEC+ deal is flexible but that it requires unanimous agreement among its 22 members to be changed.
“We have the ability to tweak if we have to tweak, but we have to all be convinced that that tweak is required,” he said.
Still, OPEC secretary general Mohammed Barkindo said the global economic recovery may not be so dire, with fiscal stimulus measures helping.
Oil demand may have cratered 9.8 million b/d in 2020 due to the coronavirus pandemic, but OPEC’s analysts project a 6.5 million b/d rebound in 2021 and Barkindo noted that the demand forecasts “are continuously being revised upwards.”
Ultimately, the availability of a COVID-19 vaccine will be the oil market’s savior, Prince Abdulaziz said.
“We’re also hopeful like everybody in the whole world that a solution to mitigate the virus in the form of a vaccine and the vaccine’s availability will be the most meaningful mitigator to the situation,” he said. “And hopefully mobility will be regained and a state of normality to the world economy will return.”
