Can OPEC+ Maintain Order As Oil Prices Rise? | OilPrice.com

Can OPEC+ Maintain Order As Oil Prices Rise? | OilPrice.com

After months of neglect from traders, oil became a hot commodity again this month as Brent surged over $65 a barrel and WTI topped $60 for the first time in a year. The rally cast a shadow over OPEC+’s resolve to keep cutting as much production as they are cutting now. Oil had been recovering steadily even before the United States lost some 40 percent of its oil production because of the Arctic cold wave that swept across the country. The Texas deep freeze certainly helped it, but its effect is already dwindling as traders take profits: Brent was down to less than $63 at the time of writing, and WTI had slipped below $60 a barrel. Yet a substantial upside potential remains that could increase internal tensions between OPEC+ members.

For one thing, U.S. demand for oil is recovering. The recovery, Bloomberg reports, started with the vaccination drive that began in December, and since then, refiners have been ramping up fuel production. The last couple of weeks have seen gasoline stocks rise but so has production.

While demand in the world’s top consumer of oil recovers, production is stalling. According to the EIA, U.S. output will remain below 12 million bpd next year as well. This imbalance will turn the United States into a net exporter this year and next, EIA said in its latest Short-Term Energy Outlook. But more importantly for OPEC+, this would push oil prices higher still, tempting barely compliant members to become even less compliant.

There is already discord within the extended oil cartel. The last time OPEC+ made a decision on production, it had to make a compromise decision to take into account the interests of those—like Russia—that insisted on some rollback of the deepest production cuts. And now, Saudi Arabia has said it would suspend its voluntary unilateral additional cuts that amounted to 1 million bpd and that Riyadh effected in its whatever-it-takes quest for higher prices.