Commodities

OPEC+ may meet this week to update production limits

By Grant Smith on 5/31/2020

LONDON (Bloomberg) – OPEC+ is close to a decision to bring forward its meeting by a few days to this week, according to people familiar with the situation.

The move, if confirmed, would give the oil cartel more flexibility to change its current production limits. The existing deal, struck in April as energy demand and prices collapsed because of the coronavirus pandemic, calls for curbs to ease from July. But that’s up for discussion at the next meeting, which will be held by video conference.

OPEC members usually decide their plans for shipping oil to customers for July in the first week of June, so an earlier meeting would give them time to react quickly to the outcome.

Algerian Energy Minister Mohamed Arkab, who holds the rotating presidency, proposed a date of June 4, instead of June 9-10. A final decision is expected on Sunday, according to two delegates.

The 23-nation OPEC+ coalition led by Saudi Arabia and Russia is undertaking record oil-production cuts to prop up prices. At the meeting they will decide whether keep the existing agreement, or extend the current curbs.

The Organization of Petroleum Exporting Countries and its partners committed to lowering output by 9.7 million barrels a day, or about 10% of global supply, in May and June. In addition, Saudi Arabia, Kuwait and the United Arab Emirates made further voluntary cuts of about 1.2 million barrels a day for June, bringing the total OPEC+ curbs to almost 11 million barrels a day.

Production cuts are meant to be eased to about 7.7 million barrels a day in July. One option the cartel is weighing is delaying the start of the tapering by up to three months.

Nigeria and the state oil company of Abu Dhabi, the UAE’s capital, have already announced plans to increase exports in July in line with the OPEC+ deal from April.

The OPEC+ agreement and recovering energy demand in China have helped push up oil prices since late April. But they are still near $35 a barrel — barely half their level at the end of 2019 and far below what most producers need to cover government spending.

Moving the gathering would also mean shifting committee meetings that normally take place before a ministerial conference to later in the month.

OPEC has an Economic Commission Board meeting scheduled for June 2-3, and a Joint Technical Committee to assess implementation of the current supply cuts on June 5.

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