OPEC + finally reaches agreement on oil production cuts for 2021

After much controversy, the OPEC + group finally reached an agreement on oil production for next year. Or at least for January.

OPEC +, as a group, will add 500,000 barrels per day in January to oil production quotas, which are currently calling for a 7.7 million barrels per day production cut. The total production cut in January will be only 7.2 million barrels per day.

Quotas could rise or fall in the future, and to determine these oil production levels after January, OPEC + ministers will hold additional meetings – one every month.

The agreement is being promoted as a win-win for all parties, although behind closed doors it is unlikely that all ministers will feel this way, as some ministers were vocally opposed to adding any production before the meeting for fear of no oil demand. Be able to maintain any additional production.

One delegate said that in addition to the agreement to return 500,000 barrels per day of production, OPEC + members who are reluctant to adhere to their production quotas will have to make up for the difference between now and March.

Additional things we know:

  • Russia’s share of January’s additional production of 500,000 bpd is 125,000 bpd.
  • Countries can either use their share of the 500,000 b / d increase by directly increasing production or – for those inactive – they can “use” their share of the additional provision to offset any additional countervailing cuts they have to make.

The fact that the agreement only covers January could mean that there are some major concessions that must be made to reach a consensus. But the January deal is sold only as a flexible deal that allows the group to react to fluctuations in demand.

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The January agreement should only have a significant impact on oil price volatility in the coming months. With new OPEC announcements every month, the market will stick to every word, and oil prices will respond in kind, regardless of their actual impact on oil prices.

In a press statement after the meeting, the President of OPEC, His Royal Highness Prince Abdulaziz bin Salman bin Abdulaziz Al Saud, criticized the media for their “imaginary” star wars that they continued to perpetuate in recent weeks, pointing to reports that the UAE and Saudi Arabia were scattered along the road. straight ahead.

Written by Julian Geiger for Oilprice.com

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