Vienna, Austria (CU)_The largest oil-producing countries, along with their exporters are expected to meet virtually on Monday (Jan 4), in order to decide production levels for February.
Following the significant drop in demand for oil, owing to the COVID-19 pandemic, the OPEC+ ministerial meeting is expected to boost production levels and develop stability in the oil market.
After the last videoconference summit held from November 30 to December 3, the 13 members of the Organisation agreed to increase production levels by half a million barrels per day in January 2021.
The member states also agreed to meet at the beginning of each month in order to discuss adjustments to production volumes, which may pave the way for a gradual return to the expected production level of 2 million barrels per day over the coming months.
The agreement between OPEC and its allies to lower their output expired at the end of March 2020, and the member states failed to reach a new deal, following which, two of the world’s largest oil producers, Saudi Arabia and Russia, announced plans to increase production dramatically and flooded the market with oil. This, against the backdrop of fall in demand due to the pandemic, led to a WTI crude collapse to minus $40.32 per barrel, meaning producers paid buyers to take the oil off their hands.
However, relations between Moscow and Riyadh have eased following the meeting between the Russian and Saudi energy ministers in mid-December in a display of unity.
Despite the crucial role played by the OPEC+ members, other countries outside the system, such as the United States which produces around 11 million barrels per day, have a major impact on the oil market. Moreover, as governments have begun rolling out vaccination programmes against COVID-19, it has become difficult to project the evolution in demand for crude oil.
