What Can We Expect From OPEC+?

Unless the perceived threat from Omicron becomes more severe over the coming days, the most likely outcome of the next round of OPEC+ meetings is a continuation of the current plan to add 400,000 barrels per day per month until April 2022.

That’s what Torbjorn Soltvedt, the principal MENA analyst at Verisk Maplecroft, said in a statement sent to Rigzone late Monday. Soltvedt noted that the oil price recovery since Friday is likely to be substantial enough remove the need for OPEC+ to slow down the pace of its planned monthly production increases and that the Omicron scare makes the already remote possibility of OPEC+ raising production further even less probable.

“The emergence of the new Omicron Covid-19 variant underscores why OPEC+ has been reluctant to push the accelerator on planned production increases,” Soltvedt said in the statement. “Faced with pressure from the U.S. to open oil taps further, Saudi Arabia’s main counterargument has been that the gradual global economic recovery is still fragile,” he added.

“Uncertainty over the Omicron variety undoubtedly strengthens Saudi Arabia’s position. Even if the impact of the new variant on oil demand turns out to be limited, the volatility in the oil market since Friday provides further cover for OPEC+ to maintain its cautious approach. The unresolved situation over Iran’s oil exports as talks resume adds another element of uncertainty for OPEC+,” Soltvedt continued. 

The Verisk Maplectoft analyst noted that the decision to postpone the Joint Technical Committee until December 2 and the Joint Ministerial Monitoring Committee meeting until December 3 highlights that OPEC+ is reluctant to alter course until the impact of Omicron is clearer. He also predicted that external pressure on Saudi Arabia, and OPEC+ more broadly, to change tack will mount if oil prices increase towards the end of 2021.

Rystad Energy’s senior oil markets analyst Louise Dickson outlined that OPEC+ is not habitual in making knee-jerk policy decisions and prefers to stay behind the demand curve. As such, Dickson predicted that “we could expect either a continued conservative approach of bringing back 400,000 barrels per day on a monthly basis, or an even more cautious maneuver that holds even more supply back until the Covid-19 impact chips fall on the table”.

OPEC+’s previous meeting, dubbed the 22nd OPEC and non-OPEC Ministerial Meeting, took place via videoconference on November 4. The 23rd OPEC and non-OPEC Ministerial Meeting was scheduled to take place on December 2.

To contact the author, email andreas.exarheas@rigzone.com