Attar warns of slow recovery ahead of Opec meeting

The "road to recovery" from weak oil demand remains "long and bumpy" and any positive effects from Covid-19 vaccines are unlikely to materialise before the second half of next year, Opec president Abdelmadjid Attar said today ahead of the group's ministerial meeting.

Weak oil demand is likely to persist into the first quarter of 2021, Attar said. "It is clear that a global deployment of vaccines will take time, and its effect will likely begin to be significantly apparent in the second half of 2021."

Attar was speaking ahead of what could be a difficult Opec meeting looking at the wider Opec+ group's policy options for the first half of next year — namely whether, and how far, to extend current crude output cuts into next year.

According to Opec+ sources, the group has not yet formed a consensus on what path it should take. Options on the table at today's meeting include extending the current collective cut of 7.68mn b/d by 3-4 months or increasing production gradually from January, rather than the original plan to raise output by around 2mn b/d, according to one delegate.

A worsening Covid-19 outlook in many regions and a rapid rise in Libyan production since September have raised concerns that oil markets could struggle to absorb an additional 2mn b/d of Opec+ supply in January. But positive developments on Covid-19 vaccines in recent weeks have supported oil prices and appear to have eroded the willingness of some key members of the group to roll over current cuts beyond December.

Iran's oil minister Bijan Namdar Zanganeh said today that he does not expect today's Opec meeting to be easy. Resistance surfaced at a hastily-planned meeting of Joint Ministerial Monitoring Committee (JMMC) members late yesterday, namely from the UAE, Russia and Kazakhstan.

"During the consultations, Kazakhstan expressed its position: the country is not against discussing the extension of the production cuts but proposes to consider some alleviation of the restrictions. The country is ready to discuss this position with its partners," a Kazakh government source said.

Opec+ sources said Kazakhstan rejected a rollover outright at yesterday's meeting.

The Opec meeting is under way. The wider Opec+ group will convene tomorrow.

By Rowena Edwards, Nader Itayim, Ruxandra Iordache, and Daniyar Mussaev