Oil Spikes As OPEC+ Meeting Starts, Saudi Oil Minister Urges “Supply Caution”, “Vigilance”

After an inconclusive OPEC+ JMMC session yesterday failed to reach any definitive agreement on oil output, moments ago the closely watched OPEC+ meeting started (watch the webcast here), and oil sprint out of the gate following comments from the Saudi Energy Minister who said the oil market has improved but the uncertainty surrounding the recovery has not receded, and urged “supply caution and vigilance in the oil market” and told members that “the right course of action now is to keep our powder dry, and to have contingencies in reserve to insure against any unforeseen outcomes.”

Saudi’s energy minister urged members of opec plus to “keep powder dry” #OOTT #opec

— Amena Bakr (@Amena__Bakr) March 4, 2021

“The right course of action now is to keep our powder dry, and to have contingencies in reserve to insure against any unforeseen outcomes,” prince Abdulaziz added #OOTT

— Amena Bakr (@Amena__Bakr) March 4, 2021

A similar cautious stance was echoed by Russian Deputy PM Novak, who said the oil market has not fully recovered yet but we are in a much better shape, COVID remains an uncertainty, we have to stick to agreements. While this comment added to the oil boost, according to oil market watcher and Energy Intel reporter, the comment was “code for the market can take more supply.” As a reminder, there has been a long-running tension between Russia and Saudi Arabia on easing production, the former seeking more output even as Riyadh seeks higher prices.

Bloomberg agrees and notes that “between the lines, Novak is clearly making the argument for a production increase, while Prince Abdulaziz is making the argument for either a roll-over or a smaller increase.”

Novak stresses the importance of conformity to the pact #OOTT #opec

— Amena Bakr (@Amena__Bakr) March 4, 2021

In any case, early indications are that OPEC+ won’t rush headlong into boosting output aggressively, and following the somewhat cautious commentary from the Russian and Saudi Energy Ministers upside was seen in the crude market with Brent moving from USD 64.60/bbl to USD 65.40/bbl over the course of 8-minutes  while WTI jumped from USD 61.80/bbl to USD 62.60/bbl over a similar timeframe.

For those looking to catch up on the latest OPEC+ thoughts and actions, the following primer from Newsquawk should come in handy:

COMMENTARY

• Saudi Energy Minister said oil market has improved but the uncertainty surrounding the recovery has not receded, and urges caution and vigilance in the oil market
• Russian Deputy PM Novak said oil market has not fully recovered yet but we are in a much better shape, COVID remains an uncertainty, we have to stick to agreements

POLICY OPTIONS TOUTED

OPEC+ options include a rollover of current cuts – several members support the idea of no curb easing in April, according to sources

• Sources earlier in the week noted OPEC+ is poised to cool down the oil market by raising production. Saudi is said to still be considering how to phase out its voluntary cut

PROPOSALS

• Saudi and Russia are discussing a proposal for a joint oil output increase, discussions are around a combined 1mln BPD, according to WSJ citing sources; no deal agreed just yet
• Russia reportedly wants an oil output increase of 125k for itself, according to sources cited by Energy Intel
• Kazakhstan’s oil output cuts are to reportedly be eased by 20k BPD, according to Energy Intel

JMMC

• JMMC offered no recommendation regarding the OPEC+ pact
• JMMC sources noted that some member states appear to be pushing for a higher level of easing of the cuts, while others are being more cautious, according to Energy Intel’s Bakr
• JMMC stressed conformity for all member states, according to source cited by Energy Intel

GEOPOLITICS

• Yemeni drone reportedly attacked Saudi Arabia’s King Khalid Airport in Khamis Mushait and Yemen Houthis later stated that they launched a missile at a Saudi Aramco facility in Jeddah – although this attack was reportedly thwarted