Russia Favors Further OPEC+ Output Hike in February
(Bloomberg) - Russia intends to support further increases in OPEC + production at the group's meeting next month, even if a new strain of the coronavirus raises demand concerns, officials familiar with the country's oil policies said .
From now on, Moscow believes it makes sense to increase the production of the Organization of the Petroleum Exporting Countries and their allies by 500,000 barrels per day in February, which corresponds to the increase already agreed for January, the officials said and asked, because of the information not mentioned is confidential.
This would be the maximum supply increase that will result from the agreement that emerged from the cartel's difficult talks in early December. Other members would have to agree in order for the production expansion to continue.
Brent fell below $ 50 a barrel on Monday after the UK government imposed a full lockdown in London and the south-east of England as a more contagious strain of the coronavirus got “out of control”. Some nations in Europe, Asia, and the Middle East have limited travel with the country. A new wave of restricted mobility could curb the recovery in global oil consumption.
OPEC + has switched to a monthly meeting schedule so that it can respond more quickly to market changes and make incremental production adjustments that are better suited to a volatile situation.
The sudden emergence of a faster-spreading variant of Covid-19 in Europe has undermined a wave of economic optimism caused by the discovery of several vaccines. However, Russia's current position shows that the nation expects the market to accommodate additional OPEC + offerings.
Global oil demand is recovering more slowly than expected and it could take up to two or three years to reach pre-pandemic levels, Russian Deputy Prime Minister Alexander Novak told an online energy forum on Monday.
The fall in oil prices due to the lockdown in the south-east of the UK and concerns over the new strain of coronavirus show how volatile the market still is, he added.
Still, Russia sees the need to gradually increase crude oil production as global demand recovers, "without upset the market balance and without creating a surplus," Novak said. "This is clearly an important issue for oil exporting countries."
It's unclear whether Saudi Arabia, the chairman of OPEC + alongside Russia, will support a production increase at the group's next meeting on Jan. 4. At talks in early December, Saudi Oil Minister Abdulaziz bin Salman had advocated maintaining the current production cuts during the first quarter and was reluctant to approve the gradual easing of these curbs.
After personal talks with Novak in Riyadh on Saturday, Prince Abdulaziz declined to comment on whether he would be in favor of another bid increase, saying only that he wanted to keep market speculators "on their toes".
"Nobody will know what we're going to do on January 4th until the day of the meeting," he said.
(Updates with Novak's comments from the seventh paragraph.)
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