OPEC+ Says Too Early to Boost Production, Gives Russia, Kazakhstan Leeway

Members of the OPEC+ group decided not to increase production in April though the oil market is facing shortages and prices have risen by more than 20% since the beginning of the year. Only Russia and Kazakhstan have been given a waiver and will be able to raise output by 130,000 and 20,000 barrels per day respectively, TASS reports citing Kommersant.

Production of the black gold will increase just slightly, by 500,000 per month, which will not impact the market situation or oil prices, Darya Kozlova from Vygon Consulting pointed out. In general, the move confirms previous conservative statements by OPEC+ that the market’s recovery is still very fragile, she added.

Saudi Arabia managed to convince other participants in the oil output cut deal that it was too early to boost production, and as a result, market shortages will remain at about the same level, making it possible to rapidly reduce oil inventories and keep prices at the $60-70 mark, Dmitry Marinchenko of Fitch said. The OPEC+ countries have taken note of the fact that oil demand will remain weak until vaccination campaigns are over, that is, until the summer at the earliest. According to the expert, the waiver for Russia and Kazakhstan indicates the flexibility that Saudi Arabia and other countries are ready to show in order to maintain the agreement.

“Russia realizes that it will face more risks than Saudi Arabia if it fails to promptly bring its oil back to the global market,” Leading Expert at the Financial University and the National Energy Security Fund Stanislav Mitrakhovich told Nezavisimaya Gazeta.

“Due to the climate conditions and production patterns, Saudi Arabia is capable of restoring oil output faster, for instance, if OPEC+ collapses. Russia, however will need more time, and still, chances are that oil production won’t fully recover. In fact, there will be a compromise between Saudi Arabia and Russia, so oil production will be increased in April but specific volumes will remain subject for negotiations,” the expert emphasized.