OPEC+ to decide next phase of production policy

The oil producer club OPEC and its allies are set to meet in a crucial gathering to determine the next phase of their production policy. Initially agreeing to cut oil production by a historical 9.7 million barrels per day last year, the group later eased the cuts to 7.7 million and further to 7.2 million barrels starting January. Ololade Olubi, Economist at Oando Energy Resources, shared insights on the potential outcomes of the meeting and the current state of the oil markets. Olubi suggested that the meeting is not expected to be as dramatic as last year, as tensions have eased and oil prices are on the rise. With an improving market, OPEC may leverage the opportunity to increase production. It is anticipated that OPEC will add 500,000 barrels back to the producers, with Saudi Arabia likely reinstating its voluntary cuts of 1 million barrels from February and March. While there might be uncertainties surrounding Russia's stance on production, overall consensus is anticipated among the parties involved. The surge in oil prices is driven by effective output cuts that witnessed 99% compliance, indicating a clear understanding of the risks at hand. As demand recovers with vaccination drives and countries reopening, some experts predict inventories to dip below the five-year average by August, signaling strong demand and favorable pricing. Despite the challenges faced by the US due to winter storms and the new administration's climate agenda impacting oil production, OPEC remains optimistic about the market dynamics shifting in their favor. With the market rebounding faster than anticipated, OPEC is confident in the continued rise of oil prices and the overall positive outlook for the industry.