Oil tankers torn at the opening of the second OPEC + summit

Published on : 04/03/2021 – 00:05

This Thursday, March 4, the Organization of the Petroleum Exporting Countries and their OPEC + allies are meeting for the second time of the year, meeting at ministerial level. Will they open the floodgates of black gold or will production always be rationed to maintain prices?

The withdrawal decided last year has borne fruit: prices which were very low have risen to the level before the pandemic, above $ 60 per barrel. The cold wave that hit the state of Texas in the United States in mid-February and which blocked oil infrastructure also contributed to the rise in American oil prices.

Will this price normalization continue? This will largely depend on the strategy of the oil-producing countries which will be enacted this Thursday.

Opening the floodgates: a dilemma and dissension

Russia and its allies are in favor of an increase in pumping to return to usual production, at the risk of seeing prices fall again.

Opposite, Saudi Arabia pleads for the cuts to continue at least until April. The math is simple. Do not reopen the floodgates too quickly, it is to avoid the formation of additional stocks and to maintain the prices at a high level, thus to benefit from a financial windfall for longer. A choice that has the advantage of sparing the United States, because high prices allow them to exploit shale oil, which is expensive to produce and which is therefore only profitable if prices reach a certain threshold.

In January, during their first summit, the group of oil companies had to negotiate hard to reach a common position; that of leaving about 7 million barrels per day underground, to supply the artificial shortage. Will this choice be adjusted today and who from Riyadh or Moscow will tip the scales?

Russia has little room for maneuver

« OPEC is Saudi Arabia, sums up an oil expert, it is therefore she who will set the pace for the restart». « The Russians will probably cooperate, they themselves have a very limited capacity to increase their production», Adds our interlocutor. Demand for black gold remains strong, especially in China, but has not reached its pre-pandemic level.

In a document released on Tuesday, Opec + experts call for not indulging in excessive optimism. Markets are more uncertain than they appear, they say, and the impact of coronavirus variants on the epidemic could give the lie to recovery forecasts.

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