Oil prices surge as Opec+ to keep output cuts unchanged

Saudi Arabia will continue to make voluntary cuts of 1m bpd until the end of April

Saudi energy minister Prince Abdulaziz bin Salman asked producers to "keep their powder dry" to meet unforeseen contingencies. Reuters/Saudi Press Agency  

Oil prices surged, with Brent topping $67 per barrel and futures in New York nearing $65 per barrel as Opec+ agreed to rollover its current pact as it keeps a tight lid on output.

Saudi Arabia, which leads the alliance along side Russia, will also extend its outsized voluntary cut of 1 million barrels per day until end of April.

Brent, the marker under which two-thirds of global crude is traded, surged 5.01 per cent to reach $67.28 per barrel 9.01pm UAE time. West Texas Intermediate, which tracks US crude grades, was up 5.25 per cent at $64.50 per barrel.

The group will continue to draw 7.2m bpd until the end of next month, deferring a planned increase in production set for early-2021.

"Prudence dictates caution," Prince Abdulaziz bin Salman told reporters on Thursday.

"We have elected to maintain, you can't keep preaching cautiousness, without demonstrating cautiousness. And because of that we have elected to keep the voluntary cuts until April,"

"We are not in a hurry to bring it forward. We are not fast, we are not furious," he added.

Russia and Kazakhstan, non-Opec members of the alliance, will be exempt from cuts for the second time and will be allowed to increase production by 130,000 bpd and 20,000 bpd, respectively. The producers were exempt to accommodate "seasonal consumption patterns", Opec+ said in a communique.

Saudi Arabia has been urging the producers to be cautious amid a crude price rally, asking them to "keep their powder dry" in order to allow for unforeseen contingencies in the market.

"I don't care about prices. I care about discipline," Prince Abdulaziz said following the meeting.

The group achieved an overall conformity of 103 per cent in February, according to Opec.

The group has given producers who flouted the quotas until the end of July to make compensatory cuts. Opec+ deferred an earlier planned output increase of 2m bpd in January in order to offset renewed mobility restrictions in Europe.

However, the group has come under pressure to raise output as crude prices have surged more than 25 per cent since the beginning of the year, due to an ongoing commodity supercycle.

Prince Abdulaziz dismissed the idea of crude riding a super cycle telling reporters "I'll believe it when I see it".
Opec's continued reluctance in raising its production as prices near $70 per barrel has prompted calls from consumers such as India.

The country's petroleum minister, Dharmendra Pradhan, publicly urged the group to stabilise oil prices and bring it to a level feasible to large energy consumers like India.

"We have to build roads, railways, airports, big projects. We have to create jobs, we have to regulate the economy. At that point of time, we need a reasonable price for our energy," he told CeraWeek by IHS on Wednesday.

Opec+ will convene its JMMC next on March 31 and will have a ministerial meeting the following day on April 1.