OPEC+ Mulls Next Move

After a few months of very difficult conditions, May showed greater promise for the industry. Oil prices leaped, discoveries were made and production got underway in Mexico. The first week of June has shown promise too, though at a more nervous pace. A “will-they-won’t-they” drama is occurring between OPEC+ countries as the question of extending the production cut is considered, while prices maintain their upwards momentum, albeit at a slower pace.

Prices Leap in May; Business Still Waiting

Oil prices saw a strong recovery in May as demand increased, OPEC+ cuts began to make an impact and economies reopened. The Mexican crude basket rose an impressive 138.96 percent to US$29.87 with world benchmarks following suit. However, along the value chain the recovery is likely to be drawn-out and, if CAPEX cuts hit Mexico, the impact of COVID-19 could be deeper than first thought.

OPEC+ Cuts to Continue?

May’s strong recovery continued into June with markets buoyed by talks of bringing an OPEC+ meeting forward to discuss continuing the output reduction. The cut’s benefits have been clear, but with the market still not out of the woods, all stake holders must think of long-term aims. At this point, extending the output cut looks a certainty and only formalization is needed.
 

OPEC+ Meeting Off

The OPEC+ meeting was called off in dramatic style as whispers of “quota cheating” began to circulate. Two countries, Nigeria and Iraq, made public statements saying they were attempting to meet their commitments. Unfortunately for the industry, oil prices wobbled at the news and the recent headlong rise on prices took a step backward.

Mexico Meets Commitment and More

Data released by CNH shows that Mexico has gone past the 100Mb/d production cut commitment it agreed for May with OPEC+ members. The entire 100Mb/d was not required to be cut due to production metrics never meeting the point at which the cut was agreed from. However, with the one-month OPEC+ cut extension still a possibility, Mexico may have to extend the reduction past June.