Oil prices bearish as OPEC meets to review production

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Oil prices fell slightly yesterday, as shipping traffic resumed through the Suez Canal after days on hold and attention now switched to an OPEC+ meeting tomorrow where the extension of supply curbs may be on the table amid new coronavirus pandemic lockdowns.

Already, there are indications that Russia, the leader of the non-OPEC group in OPEC+, favours a rollover of the alliance’s oil production cuts while seeking a slight increase for itself to meet higher seasonal demand.

Mid-day yesterday, Brent crude was down 88 cents, or 1.35 per cent at $64.10 a barrel after gaining 0.6 per cent on Monday, while the U.S. WTI was down 97 cents at $60.59 a barrel, having fallen one per cent in the previous session.

Ships were moving through the Suez Canal again on Tuesday after tugs refloated the giant Ever Given container carrier, which had been blocking a narrow section of the passage for almost a week, causing a huge build-up of vessels around the waterway.

With the likelihood that the disruption will prove minimal, the market is turning its focus to Thursday’s meeting of the Organisation of the Petroleum Exporting Countries, OPEC, and allies including Russia in Vienna, collectively known as OPEC+.

They will discuss whether to keep in place curbs on output that have kept millions of barrels a day off the market to support prices, a strategy that has largely worked in recent months.

Saudi Arabia is prepared to accept an extension of the production cuts through June, and is also ready to prolong voluntary unilateral curbs amid the latest wave of coronavirus lockdowns, a source briefed on the matter said on Monday.

Russia had sought and obtained small increases for its oil production every month since the start of the year, while all other members of the OPEC+ pact—except for Kazakhstan—were set to keep their production flat after January. Saudi Arabia is also cutting an extra 1 million barrels per day (bpd) off its oil production on top of its quota for three months through April.

OPEC+ hasn’t significantly eased oil production since January when the collective output was increased by 500,000 bpd from 7.7 million bpd in December to 7.2 million bpd. Considering the still weak global demand, OPEC+ decided in January to give Russia and Kazakhstan small increases for February and March, keeping the overall production little changed.

In each of those two months, Russia was set to ease its cuts by 75,000 bpd. For April, Russia was allowed to boost its production by 130,000 bpd, while the other members of the OPEC+ alliance are to keep their production flat next month.

“Market expectations for no change to output are largely priced in,” said Howie Lee, economist at OCBC Bank in Singapore. The revival of heavy coronavirus caseloads in Europe “has put a brake on oil’s resurgence”.

Nigeria’S crude oil production increased to 1.42 million barrels per day in February, indicating a 6.3 percent rise from the previous month, according to the latest monthly report published by the Organisation of the Petroleum Exporting Countries, OPEC.

Platts Analytics had predicted that Nigeria’s crude production would grow from 1.4 million barrels in December 2020 to over 1.7 million barrels in April 2021 and then stay at around 1.9 million barrels in the second half of the year.

But OPEC’s secondary sources said Nigeria produced an average of 1.49 million barrels in February, reflecting 161,000 barrels per day increase when compared to 1.33 million barrels in January.