Oil rises in early trade amid OPEC+ crunch meeting

Oil climbed to $64.65 per barrel on Thursday morning as the market awaits the decision of a crunch meeting of the Organisation of Petroleum Exporting Countries (OPEC) and allies. The meeting is being held to debate how to agree on a coordinated increase in output as the pandemic’s impact on the market recedes.

On Thursday morning, Brent futures rose 1.5percent to $64.65 a barrel as at 8 a.m Nigerian time after three consecutive days of losses for the first time since December 2020. The international benchmark has surged more than 20percent this year.

The cartel will consider rolling over oil production cuts from March into April instead of raising output because of fragile oil demand recovery due to persisting worries about the coronavirus.

According to Thursday’s tweets from Energy Intel’s Amena Bakr, some member states appear to be pushing for a higher level of easing of the cuts, while others are being more cautious. The divergence could be problematic because according to Bakr, “conformity for all member states is being stressed as a priority.”

Although OPEC+ members are on the same page when it comes to increasing oil supply, however the on-going debate is whether to return the bulk of 1.5 million barrels back on the market.

“Both the global economic outlook and oil market prospects show signs of continued improvement,” OPEC Secretary-General Mohammad Barkindo said at the opening of a meeting of the group’s technical experts on Tuesday. “The headwinds of uncertainty that shocked and disrupted the market last year continue to abate.”

While traders generally expect a boost in output in the 1-1.5MMbpd range, Australia and New Zealand Banking Group Limited, commonly called ANZ Banking Group has come up with a contrarian view, writing overnight that OPEC+ has a “perfect opportunity” to add 750,000 barrels.

The additional 750,000 bpd supply from April assumes a 500,000 bpd increase across the group, coupled with a 250,000 bpd increase from Saudi Arabia.

“This should be welcomed by the market, with expectations sitting at a 1.5million bpd increase,” bank says in note by Daniel Hynes and Soni Kumari.

Whatever the meeting decide on Thursday, the global oil market is poised to receive its biggest supply boost since August, when OPEC+ first began the process of tapering the 9.7 million barrel-a-day cut agreed in April last year as the pandemic crushed demand.

Achieving that would be a remarkable comeback from one of the biggest crises in the cartel’s history.

It’s almost exactly a year since a disagreement between Russia and Saudi Arabia over how to respond to the early stages of the pandemic triggered a month-long price war. The group flooded the market just as demand plunged, a disastrous decision that pushed crude prices below zero for the first time in history.

Twelve months later, fuel stockpiles in industrialized countries aren’t far off target levels and crude prices are close to break-even for some members, presenting “the perfect opportunity for OPEC+ to raise production,” analysts at Australia & New Zealand Banking Group Ltd. said in a note.