The OPEC + group agreed in January to keep production stable for February and March. At the time, Saudi Arabia surprised markets by pledging to cut its production by an additional 1 million barrels per day, a move that reflected concerns over fragile demand. Saudi Arabia agreed on Thursday to extend its additional cut through April.
In recent months, rising prices have made producers more confident that production cuts have put the market on a solid footing after the pandemic crisis. But the group chose to play it safe on Thursday. Its supply cut amounts to almost 8 million barrels per day, including the additional contribution from Saudi Arabia.
At a press conference, Saudi Energy Minister Abdulaziz Bin Salman said “the jury is still out” on the future of the oil market. “When you have this unpredictability and uncertainty, I think there are options you can make. I belong in the school of being conservative and taking things more cautiously. [the market recovery], when I see it, “he said.
The International Energy Agency expects global oil demand to grow by 5.4 million barrels per day in 2021 to reach 96.4 million barrels per day, recovering about 60% of the volume lost from the pandemic. Demand will increase in the second half of this year as more vaccines are administered, the group said last month.
Still, there are concerns about the timing of the vaccine’s distribution. Even in countries that have gained early access to doses, including the European Union, it is taking longer than expected to vaccinate the population. Further delays could weaken demand for crude later this year.
– Matt Egan, John Defterios and Chris Liakos contributed reporting.