The de-facto leader of OPEC, Saudi Arabia, made headlines through its successful leadership in ensuring the world's largest oil producers agreed at Thursday's OPEC+ meeting to keep their ongoing output cuts, except for Russia and Kazakhstan, in response to the still-weak but improving oil demand.
The Organization of Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, held the 14th ministerial meeting via videoconference to discuss production quotas after March to balance oil markets struggling with a supply glut and weak demand.
The group, except for Russia and Kazakhstan, agreed to continue production cuts in April.
Under the new deal, OPEC+ will turn down the taps to reduce overall production by 7.9 million barrels per day (bpd) in April.
Already excluded from cuts in February and March at the meeting in January, Russia and Kazakhstan will once again be allowed to increase output by 130,000 and 20,000 bpd, respectively in April due to continued seasonal consumption patterns.
The two countries had collectively increased their output by 75,000 bpd while the rest of the group held output steady.
Saudi Arabia surprised the previous meeting when it announced it would add 1 million bpd to the existing output cuts. The new agreement will also extend Saudi Arabia’s two-month output cut for an additional month through April.
"After the battering that OPEC member economies took on the back of the price drop in early 2020 and the continued impact of COVID, the desire to ramp up production and take advantage of higher prices was understandable," Ian Simm, principal advisor at consultancy IGM Energy, told Anadolu Agency.
Russia and Kazakhstan, both proponents of raising production, look like the greatest beneficiaries from the meeting with OPEC’s decision to allow their exemption from cuts, however, according to Simm, it was Saudi Arabia's leadership that reigned supreme.
"By continuing to restrain its own domestic output by 1 million bpd, convincing other member countries to maintain the production cuts largely as they are, and encouraging improved compliance, Saudi Arabia's leadership of the group and the global oil industry is as evident as ever."
"Saudi interests are best served by long-term stability in both prices -- somewhere above $50 -- and demand," he said.
Commenting on the immediate oil price uptick as soon as the meetings started, Simm said what was priced in at that time was the fact that only a few people expected the results of the meeting.
"The oil price rally won't last forever. But with most OPEC+ producers content with the $60-70 per barrel range and public and private US shale operators unlikely to take a uniform aggressive approach to drilling, there is reason to be optimistic that short-term prices will remain around this level," he added.
Norway-based Rystad Energy's head of oil markets, Bjornar Tonhaugen, said Saudi Arabia's position was what the market was expecting to form a clear oil price direction.
"Due to the size of the extra cuts, Saudi Arabia's decision has the biggest impact of all events today. Since Saudi Arabia postpones the comeback of its voluntary oil production curtailments, the market is in for some serious gains, especially since most other OPEC+ members supported a group policy rollover," he added.
By Firdevs Yuksel and Sibel Morrow