Russia foresees gradual recovery of oil industry as vaccines advance

The Organisation of Petroleum Exporting Countries (OPEC) and the producers led by Russia are more optimistic about the evolution of demand and crude oil prices in the coming months of this year. This forecast is known at a time when the market is already reflecting a gradual rise in oil prices; Brent (the European market benchmark) is up more than 13% in the year and is approaching 60 dollars a barrel. West Texas is trading in New York above 55 dollars.

With moderate optimism, OPEC+ believes that, although the economic outlook and demand "will remain uncertain", the gradual deployment of vaccines is a positive factor. Russian Deputy Prime Minister Alexandr Novak, one of the most powerful men in his country's oil industry, has spoken along these lines this week, stressing that "we are now in a phase of mass vaccination growth and the recovery of the macroeconomic agenda".

In addition to the improved outlook for the economy, which would boost the transport of goods and, later, of people, OPEC+ seems to have fulfilled the commitments it had made to contain production and, as a consequence, price volatility. A note from the technical committee of the cartel and its partners (23 countries in total), which includes December 2020, states that the production adjustments have been achieved 100%.

The committee, which met online, also pointed out that crude oil reserves stored in tanks and other infrastructures in the most important consumer countries fell in December, and this trajectory is in line with the previous four months. This is a very different situation to the one experienced last year, when the cost of storage, when demand suffered a historic slump, caused crude oil prices to turn negative.

OPEC+ stresses that "since the April 2020 ministerial meeting, oil production has been adjusted by a total of 2.1 billion barrels, stabilising the market and accelerating the rebalancing process". In addition, Arabia unilaterally decided to withdraw one million barrels per day until February. The joint committee will meet again on 3 March, on the eve of the summit of oil ministers.

At the height of the pandemic, when the foundations of the oil industry were shaken, the two US oil giants, ExxonMobil and Chevron, discussed a possible merger to reduce costs and generate synergies, according to negotiations to which The Wall Street Journal had access. The complexity of the deal and possible tough conditions from competition authorities led the promoters to shelve the merger.