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OPEC and Russia agree to gradually reopen the oil tap from January

2020-12-04T19:58:40.398Z

The world's largest oil exporters agree to increase supply by half a million barrels a day, although they reserve the option of revising the figure month by month



Reproduction of an oil well, with an OPEC logo in the background DADO RUVIC / Reuters

It has cost more than expected, but there is already an agreement in the global oil Olympus.

OPEC and Russia have agreed on Thursday a gradual increase in the amount of crude they put in the markets every day after the drastic cut agreed in the hardest part of the pandemic.

They will add an additional 500,000 barrels per day from January 1, although the figure will be recalibrated each month if necessary.

Thus, the cut of the exporting powers will go from 7.7 million barrels per day - what Germany, France, the United Kingdom, Italy and Spain consume together - to 7.2.

The way seems paved for more increases in production when the vaccine puts an end to the pandemic.

After four days of tough negotiations between the countries that wanted to maintain - and even increase - the cuts, as indicated in the roadmap agreed last spring, and those who wanted to start reaching out to raise more, the green light was announced by the Government of Kazakhstan, one of the signatories.

Members of the enlarged Organization of the Petroleum Exporting Countries (or OPEC +, as it is known in the energy world) account for about 60% of global pumping.

Despite the gradual reopening of the oil tap in the heat of the vaccine, the first doses of which will begin to be injected in the coming weeks, the market continues to be pressured by a temporary weakness in demand - planes on the ground, less use of the car, an industry that still he has not fully recovered.

And, as a backdrop, a radical change in the energy matrix, in full transition from fossil fuels to renewables.

The pact between the exporters adds some pressure on the supply side on an already highly stressed market, and predicts that the price of crude will remain at bay in the near future.

At the same time, however, it represents a small bottle of oxygen for the petro-states, which need to sell an increasing amount to rebalance their battered public finances.

And an opportunity to get rid of an ever-increasing volume of crude oil just as voices grow calling for billions of barrels to remain permanently underground as the only possible option to curb climate change.

Among the major OPEC + countries, Saudi Arabia, the second largest producer and the first global exporter, was one of the countries that most urgently needed to start ending the cuts.

The state-owned Aramco, the world's largest oil company, has been experiencing a real

ordeal

since its IPO at the end of last year: the pandemic has cut its profit in half, bad news for the diversification plans of the Desert Kingdom.

Although its Russian counterpart Rosneft is going through an equally compromised situation as a result of the health crisis, with losses of almost 700 million in the third quarter of the year, most analysts believe that Moscow has more room for maneuver than Riyadh.

In all oil-producing countries, however, the capacity for action has been reduced to the maximum: triple-digit prices are long gone and a significant part of current pumping is simply not profitable.

Oil has been one of the raw materials hardest hit by the pandemic, to the point that, at the worst moment of the health crisis, in mid-April, the price of Texas - the market benchmark in the United States - reached go negative.

The announcements about the proximity of a vaccine against the coronavirus have helped: in the last month, the Brent - reference in Europe - has gone from around 35 dollars per barrel to about 50. An insufficient increase for companies and less efficient producing countries come out of the red, but that has allowed the economies most dependent on crude oil to recover their breath.

Source: elparis

All business articles on 2020-12-04

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