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OPEC continues to take diplomatic measures on whether to increase oil production.
As we all know, oil futures have changed very little even after fluctuating between gains and losses, so the Organization of Petroleum Exporting Countries is working to reach a general consensus on whether to postpone the planned production increases since global market recovery remains uncertain. Members need to find a compromise before the next meeting, which was postponed from Tuesday due to differences between countries.
In parallel with these events, the American Petroleum Institute reported that oil reserves in the US rose by 4.15 million barrels last week. It seems that increased inventories, strong demand in Asia and a sudden resurgence of the North Sea market underscore the challenges facing OPEC.
Signs of underlying strength have resumed in the market over the past 24 hours, which indicates limited supply. Physical markets also look healthier, with around 20 US crude tankers due to sail to Asia this month.
At the online meeting on Monday, most OPEC members voted to postpone the 1.9 million barrels increase in daily supplies, which should take effect in January and last for three months. However, the United Arab Emirates was against it.
While not overtly opposing the delay, UAE Energy Minister, Suhail Al Mazroui, insisted on strict conditions - mainly the speedy implementation of the cuts that other members were required to compensate for producing too much in previous months - which made an agreement nearly impossible.
In frustration, Saudi Arabia's Energy Minister, Prince Abdulaziz bin Salman, told the group that he could step down as co-chair of the coalition. Al Mazroui was offered the post, but he refused.
According to Helima Croft of RBC Capital Markets, behind this procedural dispute lies the UAE's deepest grievance over the restrictions imposed by OPEC. She said that it "will not lead to anything good for collective agreement in 2021."
Meanwhile, Ole Hansen of Saxo Bank said, "the market will evaluate the decision, which in early 2021, will not cause additional barrels to appear."
If an agreement is not reached, stocks will rise early next year, which will lead to a bear market.
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