OPEC, Allies Near Agreement for Small Production Increase
The Organization of the Petroleum Exporting Countries and its allies are closing in on an agreement to modestly boost their collective oil output by as much as 500,000 barrels a day starting next month, people familiar with the matter said.
The agreement would mark a compromise among some of the world’s biggest producers as they meet later Thursday to formalize a deal.
The compromise bridges differences between the producers over whether the time was right to start rolling back cuts they and oil-producing allies agreed to earlier in the year in an effort to stabilize prices. Earlier this week, OPEC was leaning toward recommending keeping existing cuts in place for as much as three more months, according to people familiar with their deliberations. That ran up against opposition from some members who wanted to start pumping again as oil prices begin to recover.
That view is shared by Russia, which leads another big bloc of oil producers. OPEC and this Russia-led group, known as “OPEC-plus,” have acted in concert in recent months to stabilize oil markets after the pandemic closed swaths of the global economy, walloping demand.
The sanctioning of a modest production increase would represent a middle ground between a Saudi plan to extend curbs for three months and the group’s original plan to boost output of 2 million barrels a day in January.
The plan under discussion calls for an increase of no more than 500,000 barrels a day in January, split up proportionally among producers, and would be followed by further hikes in subsequent months, these people said.
The deal could still fall apart, according to one person familiar with the discussions, with mistrust between the two sides high after this week’s standoff.
Saudi Arabia and Russia clashed earlier this year over oil policy, effectively triggering a global price war when each opened up their spigots and flooded the market. That was happening just as the coronavirus was spreading rapidly from China to the rest of the world. Governments around the world started locking down their economies, and oil demand tumbled.
Amid a steep price drop, Saudi Arabia and Russia abandoned their rivalry, and OPEC-plus agreed to record cuts of 9.7 million barrels a day. Part of the deal called for the eventual reinstatement of that production in 2 million barrel a day increments. The first of that added production came online over the summer.
Saudi Arabia wanted a full extension of the still-existing curbs, currently at 7.7 million barrels a day, but the proposal ran into opposition from the United Arab Emirates The U.A.E. insisted it should only happen if countries like Russia, Iraq and Nigeria compensated for that past overproduction.
By Benoit Faucon and Summer Said