Opec meeting concludes without consensus

Opec ministers ended their meeting today without a consensus on what policy action they should take in the first half of next year — namely whether to stick with plans to raise output in January, or to extend the current levels of production cuts into next year.

Delegates said that there was a move to coalesce around extending the current collective cut of 7.68mn b/d by three months. But some countries pushed for conditions related to improved compliance levels from all members and an extension of the compensation agreement, which obliges quota-busters to make up for past overproduction with additional cuts.

The UAE has yet to consolidate its position, delegates told Argus. The country took a hard line on compliance at the 17 November Opec+ Joint Ministerial Monitoring Committee (JMMC) meeting when, supported by Kuwait, it argued that there is little point in extending cuts beyond December if countries that have not fully met their commitments so far continue to produce above quota.

Shaky compliance levels from countries including Iraq and Russia have so far been met with little consequence, while the UAE has fully compensated for exceeding its August quota by roughly 100,000 b/d.

Options discussed at today's meeting included 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. A worsening demand outlook in many regions, caused by a second wave of Covid-19, 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.

Weak oil demand is likely to persist into the first quarter of 2021, Algerian oil minister and Opec president Abdelmadjid Attar said ahead of today's meeting.

The three-month extension, as well as the proposed conditions, will be discussed tomorrow among the wider Opec+ group. Iran's oil minister Bijan Namdar Zanganeh expects the meeting to be difficult, because of opposition to a rollover by some non-Opec members. Kazakhstan rejected an extension outright at yesterday's hastily-planned JMMC meeting, Opec+ sources said.

Opec+ requires a unanimous endorsement to advance its policies.

By Rowena Edwards, Nader Itayim and Ruxandra Iordache