A deal was announced after two days of discussions at the 13th OPEC and non-OPEC Ministerial Meeting (ONOMM), held via videoconference, that saw Saudi Arabia unilaterally cut its oil output by a million barrels per day in February and March.
OPEC and non-OPEC members took two days to agree the strategy going forward for the next few months with Saudi Arabia surprising the meeting with its plan to add a cut of 1 million barrels a day in February and March, while while most of the rest of the group are to keep output steady.
Russia and Kazakhstan on the other stand will be allowed to make increases to their output, adding a combined 75,000 barrels a day of supply in February and March.
OPEC said in a statement: "The Meeting recognised that market sentiment has been buoyed recently by vaccine programmes and improved asset markets, but underscored the need for caution due to prevailing weak demand and poor refining margins, the high stock overhang and other underlying uncertainties. The Meeting acknowledged the need to gradually return 2 mb/d to the market, with the pace being determined according to market conditions. It reconfirmed the decision made at the 12th ONOMM to increase production by 0.5 mb/d starting in January 2021, and adjusting the production reduction from 7.7 mb/d to 7.2 mb/d."
Rystad Energy’s Bjornar Tonhaugen said: “Russia and Kazakhstan got away with increasing their output in February and March, while other OPEC members have to bite the bullet. Saudi Arabia’s offer to compensate and voluntarily cut production did not take an official form, it was an offer that was probably meant to be blurry and subject to changes when it comes to the actual cuts when the time comes. The deal, however, even though it offers some market stability until the end of March, is not a deal that OPEC members may digest easily.”
He added: "The offer suggests that the Saudis are seeing demand really threatened in the short-term and want to protect prices as much as they can, especially at a time when tensions are flaring again in the region, which creates some unpredictability over price levels."