Oil futures continued to trade higher on Tuesday after reports that the Organization of the Petroleum Exporting Countries and its allies plan to keep their plan to gradually raise production in place starting in May, and cancel a meeting that was scheduled for Wednesday.
The news comes even as worries remained that a surge in COVID-19 cases in India could lead to notable declines in demand for oil.
OPEC+ ditched plans to hold the ministerial meeting Wednesday, Reuters reported, citing four OPEC+ sources, following a meeting Tuesday of ministers who are members of a market monitoring panel.
The panel, known as the Joint Ministerial Monitoring Committee had rescheduled its meeting to Tuesday, a day earlier than previously planned.
Amena Bakr, deputy bureau chief and chief OPEC correspondent at Energy Intelligence, tweeted that the JMMC’s recommendation is to keep the output policy unchanged and cancel Wednesday’s OPEC+ meeting.
In order to cancel, however, the OPEC secretariat will have to get consent from all 23 member states, she said. The OPEC website, for now, still lists the April 28th meeting on its schedule.
West Texas Intermediate crude for June delivery
the global benchmark was up 36 cents, or 0.6%, at $66.01 a barrel on ICE Futures Europe.
OPEC+ had been facing a “dilemma in trying to manage the market in an uncertain recovery from the pandemic,” said Ann-Louise Hittle, vice president, Macro Oils, at Wood Mackenzie, in emailed commentary. “Downward revisions to India’s demand outlook are possible, as are growing risks in other non-OECD nations from continued COVID-19 outbreaks.”
A surge in COVID-19 cases in India, the world’s third largest oil importer, has fueled worries about energy demand. India recorded more than 320,000 new cases and 2,771 deaths on Tuesday, according to the New York Times. It was its sixth straight day with more than 300,000 cases and countries around the world have started to send help in the form of oxygen supplies, equipment and tests.
Concerns about the surge in COVID case in India and Japan had fueled expectations that OPEC+ may hold off on easing production cuts and helped lift crude on Monday, analysts said.
“At the same time, U.S. oil demand is continuing to climb back toward 2019 pre-pandemic levels, and a strong summer demand season is nearly certain with that nation’s vaccine progress over the last few months,” Hittle said.
At a meeting on April 1, OPEC+ said it would gradually lift daily oil production by 350,000 barrels in May, 350,000 barrels in June, and 441,000 barrels in July. It had been holding back around eight million barrels a day of output, one million of which represented Saudi Arabia’s voluntary cut. The Saudis also said at that time that they planned to ease their voluntary cut over the three-month period.
Other than demand, another “large risk” to prices would be if the Iran-U.S. talks to restore the JCPOA Iran nuclear deal were successful, said Hittle.
“Those talks, ongoing in Vienna, are likely to take weeks longer, and OPEC+ could therefore decide to wait until the early June meeting before slowing the planned increases in output,” she said, ahead of reports that Wednesday’s meeting will be cancelled. A meeting of the OPEC Conference is scheduled for June 24.
That would give the group a “chance to see if oil sanctions against Iran will be eased and stick to the plan for at least for the month of May,” said Hittle.
May natural gas
rose 2.2% to $2.85 per million British thermal units, ahead of the contract’s expiration at the end of Wednesday’s trading.
Weekly oil supplies data are set for release Wednesday from the Energy Information Administration.
On average, analysts forecast a decline of 200,000 barrels in U.S. crude inventories for the week ended April 23, according to a survey conducted by S&P Global Platts. They also expect gasoline stocks to be unchanged for the week, while distillate supplies are forecast to decline by 1.2 million barrels.