This week’s supply decision comes at a time when oil prices have rebounded to pre-virus levels, production in the U.S. has taken a hit from freezing storms and the coronavirus pandemic continues to cloud the outlook. OPEC’s de facto leader Saudi Arabia has publicly encouraged allied partners to remain “extremely cautious” on production policy, warning the group against complacency as it seeks to navigate the ongoing Covid-19 crisis. Non-OPEC leader Russia, meanwhile, has indicated it wants to push ahead with a supply increase. Analysts broadly expect OPEC to hike output from current levels, but questions remain over how much exactly and which countries will be affected.
OPEC initially agreed to cut oil production by a record of 9.7 million barrels per day last year, before easing cuts to 7.7 million and eventually 7.2 million from January. OPEC kingpin Saudi Arabia has since taken on voluntary cuts of 1 million from the beginning of February through March. Russia will likely be allowed to increase output further, he added, while Saudi Arabia will return “some or potentially all” of its 1 million barrels per day unilateral cut. Analysts expect OPEC to discuss allowing as much as 1.3 million barrels per day back into the market on Thursday.
International benchmark Brent crude futures traded at $63.01 a barrel on Tuesday morning, almost 1.1% lower, while U.S. West Texas Intermediate (WTI) crude futures stood at $60.02, down more than 1%. Oil prices, having climbed to a 13-month peak last month, appeared to extend losses that began last week on expectations that OPEC may be set to increase global supply.