OPEC’s Indecision Pushes Oil Prices Down

Uncertainty in the ranks of OPEC caused oil prices to dip by around 1 percent on Tuesday, as questions over output targets remain unanswered.

OPEC+ members had been scheduled to meet today to decide on production rates for 2021. The new rate would update this year’s historic 9.7MMb/d production cut the group implemented in April, as demand for oil plummeted. But Saudi Arabia and UAE, two of the groups’ leaders, failed to come to any preliminary agreement, Bloomberg reports.

As a consequence, talks have been delayed until Thursday. The world’s two major crude mixes, Europe’s Brent and the US’ WTI, fell 0.9 percent, 44 cents, to US$47.44 per barrel and 1.5 percent, 68 cents, to US$44.66 per barrel at 18:02GMT (12:02 Mexico City time), respectively.

In April, Mexico renegotiated the cuts OPEC had asked the country to enforce and, with the help of US President Donald Trump, agreed to cut only 100Mb/d between May and June of this year. The Mexican government’s then primary aim of increasing oil production stood counter to the desire of other member nations. Now, however, with national production not expected to hit original forecasts and the logic behind pushing production weaking in the face of the prolonged COVID-19 crisis, the country may be open to discussions once again.

The country’s production output has not recovered from May and Junes’ 100Mb/d cut as of yet and in October reported a fall for the second consecutive month. National production hit 1.627MMb/d in October from 1.644MMb/d in September, though 3P reserves have hit their highest volumes since 2007. Earlier this year, PEMEX had forecast it would produce 1.84MMb/d by the end of 2020.

OPEC’s new production cuts are likely be decided on Thursday, but weak demand would suggest that the current rate of 7.7MMb/d will last into the next year, reports Reuters.

Such is the tension between OPEC countries following the delay that Saudi Arabia is considering resigning from the chairmanship of the OPEC+, says Saudi24News.

The group must now come together if oil prices are to continue their recovery from the drop into negative pricing witnessed in April.