What does the OPEC meetings rescheduling mean for oil?
The big news this week in the oil world is OPEC’s decision to reschedule its meetings.
It’s not the decision the oil market was hoping for. Instead, there are differing opinions among its members regarding OPEC’s planned extension of oil output cuts.
Talks have been rescheduled to December 3rd 2020.
The call for rescheduling came because of disagreements between the three OPEC heavyweights on how best to proceed. Saudi Arabia, Russia and the UAE all have different visions on how best to proceed:
- Saudi Arabia – Proposes to extend the current 2 million bpd cuts through January and beyond.
- Russia – Favours a gradual increase in production volumes starting in January.
- UAE – Happy to extend production cuts but only if all OPEC members commit and comply with them and wait for all members that have exceeded production quotas to catch up with others.
Originally, after committing to production cuts in April, OPEC+ states were due to begin increasing output in January 2021. The current cuts are worth 7.7m bpd.
It seems not all is rosy within OPEC’s world. The disagreements, and failure to reach an agreement on Monday, underscores tensions within the cartel. 2020 has been an especially trying time for oil, and perhaps OPEC is struggling to deal with the current situation, or at least currently unable to find common ground on how to proceed.
ADNOC, the UAE’s national oil company, for instance, is rumoured to be questioning the validity of its membership. Even Saudi Arabia has its doubts. Flashes from Monday 30th November suggested the world’s largest oil producer is considering giving up its position as OPEC co-chair.
How have prices reacted? Prices have whipsawed on the news, but on the morning of December 1st, WTI and Brent were trading at $45 and above $48 respectively.
Commentators believe that cuts will be agreed on Thursday’s meeting.
Statistically, the outlook is good for natural gas into December.
Total US consumption of natural gas rose by 22.8% compared with the previous report week, according to data from the EIA.
In the residential and commercial sectors, consumption climbed by 81.9% as temperatures cool from a warmer than expected November.
In fact, prices have rallied 4% on the onset of colder weather feeding into higher consumption across the US.
A storm is brewing in the Atlantic with a 40% chance of turning into a cyclone.