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.

Looking Ahead

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.

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