OPEC warns of ‘immense challenges’ as agreement on cuts remains elusive

OPEC has warned that the “immense challenges” caused by the Covid-19 pandemic were likely to persist into 2021, as the group of oil producers failed to come to an agreement over an extension to its production cut agreement.

OPEC and allies have since moved to postpone talks through to Thursday, Reuters reported on Monday, citing three unnamed sources, as key players disagreed on how much oil they should pump amid weak demand. The group, which is comprised of some of the world’s largest crude producers, had initially been expected to outline the next phase of production policy on Tuesday. Oil prices, which had been on track to increase by over 20% last month, fell early Tuesday. International benchmark Brent crude trading around $47.56, down around 0.65%, while U.S. West Texas Intermediate (WTI) stood at $45.02, around 0.66% lower.

OPEC cut an unprecedented 9.8 million barrels per day in May, as the full economic impact of the coronavirus pandemic started to emerge. The group eased the curbs to 7.7 million barrels per day in August, sensing a tepid recovery in global economic activity.

Under the current agreement, the collective curbs are scheduled to taper again to 5.8 million barrels per day from January – but average demand from Asia, a second lockdown in the United Kingdom, new lockdowns in Europe and the worrying trajectory of the virus in the United States have prompted some ministers to advocate for an extension of the current cuts.

However, some members of the group are arguing against the length and depth of the extension, pointing to optimism over promising vaccine results which have helped to push oil prices to their highest level since March, further complicating ability to reach a consensus. 

OPEC expects global oil demand to decline by around 9.8 million barrels per day this year, as the second wave of the pandemic and related lockdowns put a damper on the worldwide appetite for crude. It forecasts global economic growth to slump 4.3 percent.

OPEC warns of ‘immense challenges’ as agreement on cuts remains elusive, CNBC, Dec 1