OPEC and other oil producers, a group known as OPEC+, are considering rolling over production cuts into April instead of raising output as a recovery in oil demand remains fragile due to the coronavirus crisis, three OPEC+ sources told Reuters on March 3.
OPEC+ ministers hold a full meeting on March 4.
The market has been expecting OPEC+ to ease production cuts by around 500,000 barrels per day (bbl/d) from April.
OPEC leader Saudi Arabia has also been expected to end its voluntary production cut of an additional 1 million barrels per day (MMbbl/d).
But three OPEC+ sources said on March 3 some key OPEC members had suggested keeping OPEC+ output unchanged.
It was not immediately clear whether Saudi Arabia would end its voluntary cuts or extend them, they said.
Oil prices jumped by about $1 per barrel on the news to trade near $64 per barrel.
On March 2, a document by OPEC+ experts, seen by Reuters, called for “cautious optimism” citing “underlying uncertainties in the physical markets and macro sentiment, including risks from COVID-19 mutations that are still on the rise”.
It said a recent oil price rally might have been caused more by financial players than improvements in market fundamentals.
OPEC expects global oil demand in 2021 to grow by 5.8 MMbbl/d to about 96 MMbbl/d. That would still be lower than demand in 2019 which was about 100 MMbbl/d.
Russia has been widely expected to push for more increases. But in February it failed to raise output despite being allowed to do so by OPEC+ as harsh winter weather hit output at mature fields.
JP Morgan, which said it spoke to Russia’s representative on the OPEC+ technical committee Denis Deryushkin, reported that Russia saw some rationale in raising output as the oil market was in a 500,000 bbl/d deficit.
“Russia believes that if output is maintained at current levels, the market would move into an even more severe deficit,” the bank said. “As such, production needs to be restored, but the speed and amount are yet to be decided.”
Energy firms surveyed by the Kansas City Fed said crude oil prices would need to average around $53 per barrel for drilling to be profitable.
The combined oil and gas rig count rose two to 432 in the week to April 9, its highest since April 2020, Baker Hughes said in its weekly report.
EOG Resources Austin Chalk wells, Diamondback and Centennial completions in the Permian’s Delaware Basin plus more drilling planned by Shell at its Blacktip prospect in the U.S. Gulf of Mexico top this week’s oil and gas drilling activity highlights from around the world.