OPEC+ Meets to Discuss the Future of Oil
OPEC+ Ministers May Discuss Oil Cuts
Ministers of the Organization of the Petroleum Exporting Countries, also known as OPEC+, are meeting this week to discuss their plans for oil production in 2021. Originally their goal was to ease production cuts that are currently in place by two million barrels per day starting in January of next year. But the fall coronavirus flare-up in both the United States and Europe has prompted the group to think twice about that strategy given demand for fuel has once again dried up.
As COVID cases once again spike around the world, some members of OPEC+ would like to extend the current limits on oil production to prop up the price of crude. In 2020 OPEC+ cut production by 7.7 million barrels per day, and these limits could stay in place for the first three to four months of 2021.
A Nuanced Approach
OPEC+ nations will have to decide whether to increase or cut overall crude oil production, but they will also need to take a nuanced look at a unique market landscape and respond accordingly. For example, demand for gasoline and diesel has bounced back to about 90% of where it was before COVID-19. In the Americas and Europe, driving and road usage fell by around 70% at the start of the pandemic. In November, however, driving was down by just 30%. In contrast, jet fuel demand is still down by about 50%.
Demand for oil also varies based on geography. In Austria, where the OPEC+ summit is usually held, new lockdowns have led to empty streets. This is similar to other roads around the European Union. In China and India, however, recent festivals have spurred air, plane, and car travel.
OPEC+ ministers hope to hold an in-person meeting in 2021. Buoyed by hopes for a COVID-19 vaccine, the ministers have booked the Imperial Hofburg Palace for a two-day international oil seminar in June of next year.
Analysts say that if vaccines are made widely available and are proven to be effective, OPEC+ may be able to balance inventory and increase production to something resembling normal levels. For right now, however, ministers have to make a plan for the start of 2021 for a market where a vaccine is still not widely available.
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.