OPEC+ sticks with oil policy as prices rise towards one-year high

LONDON (Reuters) – OPEC+ maintained its oil output policy at a meeting on Wednesday, a sign producers are happy that their deep supply cuts are draining inventories despite an uncertain outlook for a recovery in demand as the pandemic lingers.

A Joint Ministerial Monitoring Committee of the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, is “optimistic for (a) year of recovery in 2021,” OPEC said in a statement after the panel met virtually.

Oil has rallied from historic lows hit last year, thanks to record OPEC+ output cuts that the group is starting to unwind.

Global benchmark Brent extended gains after the meeting and rose towards $59 a barrel, its highest since late February 2020.[O/R]

“While inventories are drawing fast, the market is pricing in a smooth rollout of vaccines and that may be premature,” said Amrita Sen, co-founder of Energy Aspects.

The OPEC+ panel made no mention of changing policy, which calls for most members to hold supply steady in February and top exporter Saudi Arabia to cut output voluntarily by 1 million barrels per day this month and next.

“While economic prospects and oil demand would remain uncertain in the coming months, the gradual rollout of vaccines around the world is a positive factor for the rest of the year, boosting the global economy and oil demand,” OPEC’s statement said.

A document seen by Reuters on Tuesday showed OPEC expects the output cuts will keep the market in deficit throughout 2021, even though the group cut its demand forecast.

The OPEC+ panel meets next on March 3, which is expected to be followed by a full OPEC+ gathering to decide policy.

Rystad Energy said it expects crude supply deficits throughout the summer and OPEC+’s next move may be to pump more.

“Today’s OPEC+ meeting could be paving the way for a gradual production ramp up from April onwards,” said Rystad’s head of oil markets, Bjornar Tonhaugen.