JMMC/OPEC+ Preview

Submitted by Newsquawk

JMMC/OPEC+: Members are seen maintaining production quotas, but surprises cannot be dismissed; JMMC to meet today at 13:00BST/08:00EDT

The JMMC will convene today at 13:00BST/08:00EDT in what was a last-minute change, and the OPEC+ confab is currently still set to go ahead on Wednesday. Market expectations are skewed towards the policymakers maintaining current output quotas which were set through to July at the prior meeting. The JTC has also left its oil demand growth forecast unchanged according to the latest sources. Other reports have put more emphasis on the “monitoring” aspect whilst playing down the likelihood of a tweak to the last set quotas through to July. That being said, it is worth noting that OPEC+ has surprised at most meetings this year thus far.

THE CURRENT DEAL: The group agreed to ease output curbs by 350k BPD in each May and June followed by 450k BPD in July, whilst Saudi will return its 1mln voluntary cut by increments of 250k BPD, 350k BPD, and 400k BPD in the three months to July – with a total of some 2.1mln BPD poised to return to the market from May-July.

COVID: Since then, the COVID situation has worsened in some economies – namely India, the third-largest importer of crude – with FGE consultancy estimating a demand impact of 500k BPD from India’s outbreak alone.  On the flip side, the vaccination drive continues to be swift in some majors, with the US administering over 200mln shots within Biden’s first 100 days in office, whilst seasonal demand is also expected to solidify heading into the summer months. Ministers are likely to express concern over the rising virus cases and optimism on the current rollout efforts.

GEOPOLITICS: Geopolitics remains an important pillar in OPEC’s decision-making, albeit unsurprisingly overshadowed by COVID developments.

• IRAN: Focus has largely been on the JCPOA talks as Iran (currently exempt from OPEC+ quotas) remains adamant on the US removing some sanctions for meaningful nuclear negotiations to commence. President Biden has agreed on easing some restrictions – albeit details are scarce with eyes on any oil-related sanction relief – whilst the Iranian President voiced “significant progress”, although Biden would prefer to gauge Iran’s compliance with any deal before any significant sanction relief. Elsewhere, tensions remain high in the Middle East – with a top Iranian commander over the weekend suggesting Israel should expect more attacks following a recent clash. Further, Iranian-backed Houthi Militias have continued targeting Saudi Aramco’s oil infrastructure. Although these attacks in and of themselves carry supply-side risks, this also heats up tensions between the Gulf of Oman and the Persian Gulf, where the Strait of Hormuz global chokepoint resides.
• LIBYA: Libyan supply also remains a risk although sustained supply is yet to be seen, with the country also exempt from OPEC+ quotas. A lack of funding has seen the country’s crude output fall below 1mln BPD from its near eight-year high of 1.19mln BPD in March. However, Monday saw the NOC lift its force majeure after setline a budget dispute with the Oil & Gas Ministry. Output from the country is now seen rebounding and would be a factor for OPEC+ members to account for.
• OTHER GEOPOLITICS: The geopolitical landscape remains volatile with ongoing tensions between US-China alongside Russia-Ukraine/NATO, however, these do not pose an immediate threat and are likely to take a back seat for now.

NOPEC: The US NOPEC bill has been turning eyes after a US House panel passed the bill which would allow the US Justice Department to bring anti-trust lawsuits against OPEC members for manipulating oil prices, which are then fed through to American consumers. This development is unlikely to be much of an influence at the upcoming meeting but could materialise into more of a tail risk during the year.