OPEC should extend output cuts to spring 2021: analyst

ERBIL, Kurdistan Region — OPEC (the Organization of the Petroleum Exporting Countries) and OPEC+ should extend cuts in oil production introduced in response to the COVID-19 pandemic until early 2021, an analyst told Rudaw on Tuesday.

“All measures show us that it’s better for OPEC+ to at least extend the output cuts to the first quarter of 2021,” economic analyst Dr. Fahad Bin Juma told Rudaw’s Mohammed Sheikh Fatih, saying it is important to wait and see if COVID-19 vaccines are effective. 

“After those 3 months, it will be clear whether or not the vaccine will be effective, whether the global economy or travel will open again,” he said.

Oil prices will be negatively impacted if cuts are not extended, he added. 

OPEC, a 13-member group originally founded by Iran, Iraq, Kuwait, and Saudi Arabia, controls more than half the world’s oil reserves and has a major influence on global oil prices. 

OPEC producers and allies, known as OPEC+, agreed on April 12 to slash global output by 10 percent in an effort to boost record low prices caused by reduced demand during the coronavirus pandemic.

According to the agreement put into effect in April, production cuts currently amount to 7.7 million barrels per day, set to be reduced to 5.8 million as of January 2021. 

Member states were unable to come to an agreement on a  three-month extension in meetings in Vienna on Monday and Tuesday, with some countries in favour of higher production levels due to strained economies. Talks were adjourned until Thursday – leading to a drop in oil prices.

“The different cuts are going to impact different countries in separate ways,” oil and gas analyst Homayoun Falakshahi told Mohammed Sheikh Faith on Monday, “because some countries depend more than 90 percent on oil revenues, for example Iraq.”

Iraq had to cut an extra 400 thousand barrels per day, on top of the 850 thousand designated by OPEC+ earlier this year to make up for overproduction.

Iraqi Oil Minister Ihsan Abdul-Jabar denied on Saturday that Iraq had requested an exemption from the agreement.