The cartel of oil countries and its allies led by Russia are expected to postpone the increase in production they had planned for a few months.

Global crude oil consumption remains depressed.

Faced with the protracted health crisis, the major oil-exporting countries are preparing to correct their strategy. The thirteen member states of OPEC and their ten allies led by Russia meet Monday and Tuesday to answer a thorny question: is it time to increase production? And the answer will probably be, no, not yet.

Since May, the group of twenty-three countries has imposed quotas of an unprecedented level in the history of black gold. Objective: drastically reduce global supply in order to keep up with plummeting demand with the Covid-19 pandemic. OPEC and Russia have voluntarily reduced their production by 10 million barrels per day, a contraction of almost 10% of global supply. This historic effort, combined with the decline in production in the United States, Brazil and Norway, helped to rebalance the market. And prices have gone up. They have appreciated further in recent days, due to the upcoming arrival of vaccines. On Friday evening, a barrel of brent was trading at more than 48 dollars. Still far from the 70 dollars approached at the start of the year, but a spectacular rise from the floor of 20 dollars, sunk in April.

A partial relaxation of the quotas has already taken place last summer. The agreement signed by OPEC and Russia in the spring provides for further easing on January 1: producing countries could raise their production by 2 million barrels. But it is unlikely that the twenty-three members will follow this roadmap. “We believe the group will postpone this rise for at least three months,” write the UBS analysts. On the demand side, travel restrictions in Europe and the United States "will weigh on consumption in the fourth quarter and potentially in the first quarter of 2021", they recall. The second wave of Covid-19 was not expected when the agreement was signed. And on the supply side, Libyan production is soaring again, exceeding one million barrels per day. Again, an unforeseen event, the result of the truce signed between the two main factions at war in Libya.

Live Storage Capabilities

Finally, Joe Biden's victory opens the prospect of a resumption of production in Iran, which is currently hampered by American sanctions. "It is possible to envisage a lifting of sanctions next year, which would result in a return of Iranian exports," said Francis Perrin, research director at Iris.

“Without extending current quotas, there is a risk that global stocks will increase at a time when storage capacities are still under strain,” writes Edoardo Campanella, analyst at UniCredit. The unprecedented increase in oil inventories had triggered panic in the markets in April, the barrel of American WTI even falling into negative territory for a few hours. A nightmare that stays in everyone's mind. Faced with these risks, both on the supply side and on the demand side, "we believe that OPEC and its allies will favor caution and avoid any decision that could derail a recovery that is still in its infancy", judge the experts of RBC Capital Markets .

Allies are never guaranteed to get along, however. Divergent voices have been heard in recent days, particularly in the United Arab Emirates, OPEC's third largest producer. Although they are staunch allies of Saudi Arabia, the Emirates have even spread the rumor that they could leave OPEC! Such a revolution seems unlikely in the short term, but it points to growing tension between Abu Dhabi and Riyadh over the oil issue. “The Emirates have greatly reduced their production, continues Francis Perrin. They even went beyond their commitments and they are stamping with impatience”.