OPEC+ reportedly nearing compromise on holding oil output steady

Oil pumping jacks, also known as "nodding donkeys", are reflected in a puddle as they operate in an oilfield near Almetyevsk, Russia, on Sunday, Aug. 16, 2020.
Andrey Rudakov | Bloomberg via Getty Images

Top oil producers are nearing a compromise to hold output steady in February, setting aside a possible increase amid fears that new coronavirus lockdowns will further depress demand, four OPEC+ sources told Reuters on Tuesday.

Brent crude futures for March jumped $1.83, or 3.6%, to $52.91 per barrel, while U.S. West Texas Intermediate crude for February was up $2.01, or 4.2%, at $49.64 per barrel.

OPEC+, which combines OPEC producers and others including Russia, failed to agree on Monday and was scheduled to restart talks at 1500 GMT.

OPEC+ sources told Reuters that Russia and Kazakhstan had initially insisted on raising production by 500,000 barrels per day (bpd) while Iraq, Nigeria and the United Arab Emirates suggested holding output steady.

An internal OPEC document, seen by Reuters on Tuesday and dated Jan. 4, set out several scenarios for 2021, including the possibility of cutting by 500,000 bpd in February.

It noted the advisory OPEC+ joint ministerial committee highlighted bearish risks and "stressed that the reimplementation of COVID-19 containment measures across continents, including full lockdowns, are dampening the oil demand rebound in 2021".

Three OPEC+ sources said chances of a cut were slim as very few producers supported it and most countries favoured either steady supply or an increase in February.

"The most likely option is keeping the ceiling unchanged in February," an OPEC delegate said.

Saudi Energy Minister Prince Abdulaziz bin Salman on Monday said OPEC+ should be cautious, despite a generally optimistic market environment, as demand for fuel remained fragile and variants of the coronavirus were unpredictable.

New variants of the coronavirus first reported in Britain and South Africa have since been found in countries across the world.

OPEC+ producers have been curbing output to support prices and reduce oversupply since January 2017.

As COVID-19 hammered demand for gasoline and aviation fuel, benchmark Brent oil futures plunged below $16 a barrel last April, forcing OPEC+ to boost its output cuts to a record 9.7 million bpd in mid-2020.

With Brent holding above $50 per barrel, OPEC+ this month took the opportunity to raise output by 500,000 bpd, putting its current cuts at 7.2 million bpd.