OPEC+ Near Consensus on Holding Oil Output Steady Next Month

OPEC+ was nearing a consensus that would hold its oil output steady next month, after the group rejected Russia’s proposal for a production increase.

Negotiations were ongoing and not all details were agreed, one delegate said. Formal ministerial talks scheduled for Tuesday afternoon hadn’t yet started after being pushed back, said another delegate.

If the agreement is finalized, its significance would go beyond the output increase of 500,000 barrels a day the market had, prior to this week, been expecting for February. It also could have some bearing on similar supply boosts traders had penciled in for March and April.

The prevailing view in the group -- that the highly infectious new variant of Covid-19 could undermine the fragile oil-market recovery -- may mean a cautious approach to any production hikes for several months.

Brent crude jumped 3.5% to $52.88 a barrel at 3:17 p.m. in London.

The deal would be a victory for Saudi Energy Minister Prince Abdulaziz bin Salman, who has consistently sought to keep a tighter rein on output than many of his allies. Last month, he failed to impose his will on the group, and ended up reluctantly supporting a 500,000 barrel-a-day production hike in January.

This time around, the majority of the alliance was on the kingdom’s side, opposing a proposal from Russian Deputy Prime Minister Alexander Novak for another 500,000 barrel-a-day increase next month, delegates said, asking not to be named because the talks were private.

The split between the two de-facto leaders of OPEC+ reflects their differing priorities. Riyadh has shown it’s worried about undermining the oil-market recovery, while Moscow said it doesn’t want to create space for a rebound in rival production.

The Organization of Petroleum Exporting Countries and its allies are currently idling 7.2 million barrels a day, or about 7% of world supplies. In December, when prices were recovering rapidly due to optimism about new Covid-19 vaccines, the group agreed to return a further 1.5 million barrels a day in installments over the coming months.

That deal also set an accelerated schedule of meetings every month -- rather than just a few times a year -- so the cartel could fine-tune production levels more precisely and avoid capsizing the price recovery they spent most of 2020 working to achieve.

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