The OPEC+ alliance of oil producers will face a big test of its cohesion in a few weeks’ time, when ministers meet to discuss the next step in their historic production deal aimed at rebalancing the world’s oil supply with recovering demand. Things have almost moved too quickly in their favor.
Recent increases in crude prices and the rapid drawing down of visible stockpiles will undoubtedly lead to calls for a more rapid raising of production targets than was envisaged in December. That may well reignite tensions between the co-leaders of the group, Saudi Arabia and Russia, with the potential for more brinkmanship that could undermine the price recovery.
The report card was very good when the producer group’s monitoring committee met last week to evaluate progress so far:
- Aggregate compliance with the deal since it came into effect in May is at an unprecedented 99%
- Brent crude prices are testing $60 a barrel, a level not seen in more than a year
- Commercial oil stockpiles in the developed nations of the OECD are coming down and the group now expects them to fall below their five-year (2015-2019) average by August — a key target for Saudi Arabia
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