Oil: OPEC at the bedside of a market depressed by the pandemic

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The Organization of the Petroleum Exporting Countries (OPEC) and its allies are meeting Monday and Tuesday to try to revive a crude market still depressed by the coronavirus pandemic.

After an “annus horribilis” which saw the consumption of black gold and prices plummet, the members of the cartel could decide to extend the level of reduction of their current production beyond the 1er January.

OPEC and other major producers, notably Russia, united under the term Opec +, have made drastic cuts this year in their production of black gold in an attempt to adapt it to a level of demand that melted.

According to the current deal decided in April, the current market withdrawal of 7.7 million barrels per day is to be reduced to 5.8 million as of January 2021, but most observers expect a delay of three to six months.

The influential ministers of the cartel have also sent signals in this direction in recent weeks, and the good news around vaccines should not change their minds.

The AstraZeneca, Pfizer / BioNTech and Moderna laboratories have indeed announced in recent weeks a high efficiency of their candidate vaccines against COVID-19, a real lifeline to restart economic activity, travel and therefore consumption of black gold.

But their impact should not be felt for months while the action of the cartel aims at least the first, at most the second quarter of 2021.

Tensions and psychodramas

But nothing is ever won in advance with OPEC + because the group of twenty-three producer countries features as many different domestic situations, and almost as many opinions on the supply policy that should be taken.

In mid-November, for example, the United Arab Emirates showed some reluctance to continue to fully implement the voluntary reductions beyond the end of the year.

The cartel must also manage the relative appreciation of some of its members to respect the cut quotas assigned to them.

Bad students who pump more than expected by the agreement, Iraq and Nigeria in the lead, are regularly criticized by the leader of the alliance, the Saudi Minister of Energy Abdel Aziz ben Salman.

And the memory of the fiasco of the first summit of the year is still vivid. At the beginning of March, Russia and Saudi Arabia had left Vienna back to back and engaged within a month in a fratricidal price war.

Supply control

If the cartel is attentive to crude oil prices, which have returned to their levels at the start of the pandemic, between 45 and 50 dollars for the two world references (North Sea Brent and American WTI), it is also watching for data from production outside of its fold and filling levels of storage capacities around the world.

Supply from the world’s largest producer, the United States, has fallen from its all-time highs reached at the start of the year, to 11 million barrels per day. And the victory of Democrat Joe Biden, who carries a timid but real plan to limit the exploitation of shale oil in the country, suggests that the peak of American production has passed.

OPEC + must also monitor production levels in its ranks, especially as three of its members are not bound by quotas.

This is the case of Libya, whose production almost reduced to nothing in 2020 as a result of an internal conflict has skyrocketed since October. It has now exceeded one million barrels per day, according to the Libyan National Oil Company (NOC).

In the medium term, a more flexible American policy vis-à-vis Iran, also not affected by quotas, could bring back to the market hundreds of thousands of daily barrels that it will have difficulty absorbing in the future. state.

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