Daily Management Review

OPEC+ agrees to revise oil quotas every month


The OPEC+ countries, which spent the last week arguing over the level of new production quotas in 2021, reached a brief agreement at a meeting on 3 December.

According to the deal approved in April, OPEC, Russia and a number of other major oil producers are reducing production to balance the market affected by the coronavirus. 

As of January 1, the total quota was to increase by 2 million barrels per day (bpd), while the total reduction was to decrease to 5.7 million bpd. However, due to the second wave of coronavirus, Saudi Arabia proposed to maintain the current quotas for the first quarter of 2021. This was the decision that seemed to be the most likely, and it was the market's assessment.

Discussions among OPEC+ members on 30 November were so heated that the co-chairman of the monitoring committee, Saudi Arabia's Energy Minister, Abdul Aziz Bin Salman, refused to host the next meetings. As a result, the meeting on 3 December was moderated by another co-chairman, the Deputy Prime Minister of the Russian Federation, Alexander Novak.

Finally, OPEC+ decided to increase production, but only in January and only by 0.5 million bpd instead of the previously agreed 2 million bpd.

The uncertainty increases the fact that countries have also agreed to discuss monthly quota increases, but to increase them by no more than 0.5 million bpd at a time.

It is therefore a compromise option, which will nevertheless allow a total reduction quota of 5.7 million bpd to be reached no earlier than April.

source: reuters.com