Saudi Minister of Energy Abdulaziz bin Salman (R) is pictured with his Russian counterpart Alexander Novak as they arrrive for a meeting of the Saudi-Russian Joint Committee on December 19, 2020.
FAYEZ NURELDINE | AFP | Getty Images
LONDON — A group of some of the world’s most powerful oil producers will hold a crucial meeting on Thursday to discuss reversing some of the output cuts it made last year.
OPEC and its non-OPEC partners, an energy alliance sometimes referred to as OPEC+, will convene via videoconference in a bid to reach consensus over how to manage supply to the market.
The group last year agreed to restrict the amount of oil it produces in an effort to prop up oil prices as strict public health measures coincided with an unprecedented fuel demand shock.
This week’s supply decision comes at a time when oil prices have rebounded to pre-virus levels, production in the U.S. has taken a hit from freezing storms and the coronavirus pandemic continues to cloud the outlook.
OPEC’s de facto leader Saudi Arabia has publicly encouraged allied partners to remain “extremely cautious” on production policy, warning the group against complacency as it seeks to navigate the ongoing Covid-19 crisis.
Non-OPEC leader Russia, meanwhile, has indicated it wants to push ahead with a supply increase.
Analysts broadly expect OPEC+ to hike output from current levels, but questions remain over how much exactly and which countries will be affected.
At an industry event last month, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman reportedly said to those trying to foresee the energy alliance’s next move: “Don’t try to predict the unpredictable.”
Tamas Varga, analyst at PVM Oil Associates, told CNBC via telephone that he believed OPEC and non-OPEC partners had done an “amazing job” in rebalancing the market.
However, while the global oil demand is recovering, he warned that the recovery is still “very, very fragile.”
“What really matters here is Russia and Saudi Arabia. The breakeven price for Russia’s budget is much lower than that of Saudi Arabia, so you will see a kind of gap in the views between these two countries,” Varga said.
OPEC+ initially agreed to cut oil production by a record of 9.7 million barrels per day last year, before easing cuts to 7.7 million and eventually 7.2 million from January. OPEC kingpin Saudi Arabia has since taken on voluntary cuts of 1 million from the beginning of February through March.
An oil pumping jack, also known as a “nodding donkey”, in an oilfield near Dyurtyuli, in the Republic of Bashkortostan, Russia, on Thursday, Nov. 19, 2020.
Andrey Rudakov | Bloomberg | Getty Images
Alexander Novak, Russia’s deputy prime minister, appeared to signal Moscow’s intent for a supply increase last month, claiming the market has already balanced.
“Russia wants to move back towards normal production as quickly as possible while Saudi Arabia wants to enjoy high prices a little while longer and rather keep the market on the tight side than the loose side. We think both will get what they…