Saudi Arabia: Oil prices dip in early April
Oil prices fell in recent weeks, as OPEC+ agreed to ease its production cuts starting from the month of May. On 9 April, the OPEC oil basket traded at USD 61.2 per barrel, down 7.8% from the prior month. That said, the price was 21.9% higher on a year-to-date basis and was 188.9% higher than on the same day last year.
On 1 April, OPEC+ members met to discuss the current production curtailment schedule. The committee decided to keep its output cuts largely steady through April, but approved the adjustment of production levels for May, June and July. The committee will continue to monitor conditions in the global oil market and meet on a monthly basis to determine whether lowering production cuts will be necessary for the following month, with each increase being no more than 0.5 million barrels per day (mbpd).
In terms of OPEC production, combined crude oil output among members decreased from 25.5 mbpd in January to 24.8 mbpd in February (the latest month for which data is available). This mostly reflected lower output in Saudi Arabia (January: 9.1 mbpd; February: 8.2 mbpd) as it previously volunteered to cut production by 1.0 mbpd more than what was required under the OPEC+ agreement for February–April.
Our panelists expect Saudi oil output to fall slightly in 2021 relative to last year due to its commitment to bolster crude oil prices.
Commenting on the outlook for OPEC+ production, Edward Bell, senior director at Emirates NBD, noted:
“There is an outside possibility that OPEC+ would deepen their cuts further to hasten the draw down of global crude and product inventories. We would expect to see pushback from several producers toward such a strategy, particularly from members like the UAE, but given Saudi Arabia’s current strategy of keeping output decisions secret until the last minute, we won’t rule out a further unilateral cut from the kingdom. In the scenario where output cuts are deepened we expect it would allow prices to jolt higher and affirm our already bullish outlook for oil prices: for reference, we expect Brent to record an average of USD 70/b for the rest of 2021.”