The OPEC+ group agreed in January to keep production steady for February and March. At that time, Saudi Arabia surprised markets by pledging to cut its production by an extra 1 million barrels per day, a move that reflected unease about fragile demand. Saudi Arabia agreed on Thursday to extend its extra cut through April.
In recent months, rising prices have made producers more confident that production cuts have put the market on a solid footing following their pandemic crash. But the group choose to play it safe on Thursday. Its supply cut amounts to nearly 8 million barrels per day, including the extra Saudi contribution.
At a press conference, Saudi energy minister Abdulaziz Bin Salman said the “jury is still out” on the future of the oil market. “When you have this unpredictability and uncertainty, I think there are choices you could make. I belong to the school of being conservative and taking things in a more precautionary way. I will believe in [the market recovery], when I see it,” he said.
The International Energy Agency expects world oil demand to grow by 5.4 million barrels per day in 2021 to reach 96.4 million barrels per day, recovering around 60% of the volume lost to the pandemic. Demand will surge in the second half of this year as more vaccines are administered, the group said last month.
Still, there are concerns about the pace of vaccine distribution. Even in countries that have procured early access to doses, including the European Union, it’s taking longer than expected to vaccinate the population. Further delays could weaken demand for crude later this year.
— Matt Egan, John Defterios and Chris Liakos contributed reporting.