Opec+ must stick to their agreements: Saudi Arabia

DUBAI:  Opec+ oil producers must be prepared to respond to the market and should stick to their agreements, Saudi Arabia’s energy minister said on Tuesday.

Opec+, which groups the Organization of the Petroleum Exporting Countries, Russia and others, is considering delaying its plans to increase oil output in January as demand for fuel has remained under pressure due to the coronavirus crisis.

“We as a group do not want to give the markets any excuse to react negatively,” Saudi Energy Minister Prince Abdulaziz bin Salman said at the start of a virtual meeting of the Opec+ panel, the Joint Ministerial Monitoring Committee (JMMC).

“The markets will not be kind to those who do not stick to agreements. This is why we must be prepared to act according to the requirements of the market. I recently said we must be ready to tweak the terms of our agreement if need be,” he said.

The JMMC can recommend policy steps to OPEC+, which agreed record oil cuts this year. Some members of OPEC+ have exceeded their agreed output quotas.

The group’s existing cuts of 7.7 million barrels per day (bpd) were due to ease to 5.7 million bpd in January. That plan is now being reviewed due to persistent weak demand, OPEC+ sources say.

Oil prices fell back on Tuesday after being buoyed by expectations that OPEC+ producers would keep supplies tight and news of a second promising COVID-19 vaccine as tightening coronavirus-driven restrictions spurred caution.

Brent and West Texas Intermediate crude were both up by about 40 cents before falling into negative territory.

Brent was down 3 cents, or less than 0.1%, at $43.79 a barrel by 1213 GMT while WTI was down 5 cents, or 0.1%, at $41.29.

“Oil prices enjoy modest gains this morning, as enthusiasm over a new, seemingly more efficient, vaccine has led a new price rally,” said Rystad Energy’s head of oil markets, Bjornar Tonhaugen.

“Now all eyes are on possible leaks from today’s Opec+ technical meeting,” he added.

OPEC+, which groups the Organization of the Petroleum Exporting Countries, Russia and others, holds a ministerial committee meeting on Tuesday that could recommend changing quotas for next year when all the ministers meet on Nov. 30 and Dec. 1.

Opec+ has lowered its outlook on oil demand growth for 2021, a confidential document seen by Reuters shows, supporting the case for a tighter policy on output next year.

Brent and WTI have risen more than 10% in the last six days after Pfizer said its COVID-19 vaccine was more than 90% effective. Prices had a further boost this week when Moderna said its vaccine was 94.5% effective. “Developments with regards to a vaccine are constructive for oil demand in the medium to long term. However, for the near term it changes little, with still plenty of concern over the demand impact from the latest wave of COVID-19,” said ING commodity strategist Warren Patterson.

Near-term economic outlook remains hazy as the grip of the virus grows stronger, with Sweden moving to restrict the size of public gatherings and a British medical adviser suggesting strengthening the three-tier system of restrictions when the full lockdown in England ends.

But China’s crude oil throughput in October rose to its highest level, underpinning a fast demand recovery.

“Oil demand in China is exceeding pre-COVID-19 levels which suggests oil demand is not permanently impaired,” analysts from Bernstein Energy said, saying this supported data indicating “oil demand has not been structurally damaged” by the pandemic.

 Opec and its allies hold a ministerial committee meeting on Tuesday to look at adjusting plans for oil supply cuts next year as the coronavirus crisis continues to drive down demand.

The group known as Opec+, comprising the Organization of the Petroleum Exporting Countries, Russia and others, are now due to wind down cuts that now stand at 7.7 million barrels per day (bpd) to 5.7 million bpd from January.

But a worsening demand outlook and rising supplies from countries such as Libya has prompted Opec+ to consider pushing back any increase in supply by three or six months.

The following graphics were included in a confidential report seen by Reuters that was drawn up by an Opec+ panel, known as the Joint Technical Committee (JTC).

Opec+ has looked at various scenarios on altering the deal on output cuts and the impact each scenario would have on reducing OECD inventories in line with the five-year average.