Members of the Organization of the Petroleum Exporting Countries (OPEC), meeting by videoconference, began Saturday to discuss the consequences of their drastic reduction in production put in place to counter the effects of the coronavirus pandemic.
Their meeting, originally scheduled for next week, started shortly after 12:00 p.m. GMT (2:00 p.m. in Paris).
The 13 countries of the cartel will find their 10 allies of OPEC +, including Russia, during a second meeting scheduled for 2:00 p.m. GMT, according to a statement from the organization.
The cartel's usual weapon, shutting off the tap to support prices, has been used with unprecedented vigor this year. After an agreement torn down on April 12, it is not less than 9.7 million barrels per day (mbd) that the signatory countries of OPEC + had together to withdraw from the market since May 1 to cope with a drop in demand unprecedented aggravated by the coronavirus pandemic.
The terms of this agreement specify that the reduction in production evolves over time: from July 1, cuts must go to 7.7 mbd, until December, then to 5.8 mbd from January 2021 to April 2022.
"It now seems very likely (that OPEC +) will extend the current reductions from May to June by another month," said Bjørnar Tonhaugen, analyst at Rystad Energy.
Some market observers expect an even longer extension, until the end of the summer or even the year. Because even if it is underway in many regions of the world, deconfinement has not brought crude consumption to its pre-crisis level, already below supply at the time.
- Respect your quota -
As often, negotiations promise to be tense between Russia and Saudi Arabia, the two heavyweights of the cartel, which even sparked a short but intense price war after the collapse of previous negotiations in early March.
Compliance between commitments made by countries and their implementation could be the main stumbling block: this thorny subject "complicates the efforts" of the whole group, according to Al Stanton, analyst at RBC.
Data provider Kpler calculates that the expanded cartel cut production by around 8.6 mbd in May, 11% less than expected.
Iraq and Nigeria are singled out, but the latter opened the door on Saturday to compensation in July, August and September for the surplus pumped since early May.
Another pebble in the shoe of the alliance built around the cartel, Mexico ruled out Friday any further decline in its production: "we could not adjust our production further," said Mexican President Andres Manuel Lopez Obrador during his daily press conference, tackling in passing, without naming them, the countries which have not fulfilled "their part of the contract".
Despite these doubts, OPEC policy has shown its effectiveness since prices rose in early June around 40 dollars per barrel for the American benchmark, the West Texas Intermediate (WTI), and its European equivalent, Brent de the North Sea.
They had reached historic lows around April 20, hitting the 15 dollar mark for Brent and even going negative for WTI.
This summit, originally scheduled for June 9 and 10, was brought forward on the proposal of the Algerian Minister of Energy Mohamed Arkab, who holds the rotating presidency of OPEC.
The meeting is held by videoconference, due to travel restrictions.
© 2020 AFP