Opec+ JMMC recommends keeping output policy: Update

Market: Crude oil
01/06/21

Adds comments from pre-meeting press conference throughout

The Opec+ Joint Ministerial Monitoring Committee (JMMC) has recommended sticking with the group's policy to increase crude production in June and July, four delegates told Argus.

As per the current agreement, the group's collective output ceiling rose by 350,000 b/d in May and is due to go up by another 350,000 b/d this month and by 441,000 b/d in July. These increases coincide with Saudi Arabia's plan to gradually unwind its additional 1mn b/d output cut in the May-July period.

Brent crude prices have averaged $66.60/bl since April, compared with $29.35/bl during the same two-month period a year earlier.

"It is evident that the decision we took back at the start of April has proven both reasonable and judicious," Opec president and Angolan oil minister Diamantino Azevedo said before today's ministerial meeting. Saudi energy minister Prince Abdulaziz bin Salman and Russia's deputy prime minister Alexander Novak echoed Azevedo's comments, saying that the rollout of Covid-19 vaccines has improved oil demand in some regions and put the global economy on the right track to recovery.

"However, there are still clouds on the horizon," Prince Abdulaziz said. "Therefore we should continue to consult and closely monitor market fundamentals and be proactive to ensure market stability."

Two issues have loomed ahead of today's Opec+ meeting. A sharp rise in Covid-19 cases in India since the start of the second quarter has undermined demand projections for the first half of the year. And ongoing talks in Vienna over Washington's return to the 2015 Iran nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA), have raised the prospect of US sanctions on Iran being lifted, which could trigger a gradual recovery in Iranian crude output to pre-sanctions levels of around 3.8mn b/d from 2.4mn b/d now, according to Argus estimates.

But the speed of any growth in Iranian production will ultimately depend on how quickly a deal can be reached. And the potential return of Iranian barrels to the market was not a major point of discussion during the JMMC, delegates said.

Market pressures have been balanced to some extent by a reduction in OECD stocks back to around 2015-19 levels and a limited rise in US shale output. Kuwait's oil minister Mohammed Abdul Latif al-Fares said today that the oil market "will be able to absorb the gradual production increases" planned by Opec and its non-Opec partners over the next couple of months as global oil demand gains support from Covid-19 vaccine programmes.

Prince Abdulaziz also emphasised that countries which have overproduced since May last year should strive to compensate through additional cuts by the latest September deadline — which has been repeatedly postponed. "We should strive to put this episode behind us — now is an opportune time," Prince Abdulaziz said.

By Rowena Edwards, Ruxandra Iordache and Nader Itayim

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