A source in the Organization of the Petroleum Exporting Countries and another person familiar with the approach to thinking in Russia said that OPEC and Russia are considering deepening oil cuts early next year in an effort to support the oil market.
It is decided that OPEC and allied producers led by Russia, within the framework of the “OPEC Plus” group, will reduce the volume of cuts of 7.7 million barrels per day by about two million barrels per day as of January.
But the impact on energy demand due to restrictions on movement caused by the second wave of the Corona pandemic makes rethinking inevitable.
“It looks like we will have to deepen the cut in the first quarter,” said the source familiar with Russia’s thinking and who declined to be named.
A source at OPEC said that producers “are studying several options in addition to extending the term (of the current cuts).”
However, the source said that deepening the reduction would be a “difficult decision” as it would give producers outside “OPEC Plus” more market share.
On Monday, representatives of Russian oil companies and Russian Energy Minister Alexander Novak held talks that also boosted prospects for maintaining production restrictions rather than easing them, according to two sources in the sector.
The source said that the final decision on oil production will be taken by President Vladimir Putin, who last month did not rule out extending deeper oil cuts for a longer period if market conditions required it.
While Russia is the biggest non-OPEC ally, Saudi Arabia, OPEC’s largest producer, said at a ministerial meeting last month that no one should question the group’s commitment to providing support to the market.
Saudi Energy Minister Prince Abdulaziz bin Salman said, “We will not shirk our responsibilities in this regard.”
Analysts say that in light of the escalating rate of Coronavirus infections in Europe and the United States and the impact of new government restrictions on movements on oil demand, OPEC Plus measures to support the oil market are possible.
JP Morgan said last week, “We believe that those additional supplies from OPEC Plus may not be needed at the present time and the alliance may choose to postpone … the reduction decision for a quarter.”
OPEC Plus will meet on November 30 and December 1 to set policy.
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