Delaying production? OPEC plots next move amid seismic oil market divide

 

The east-west divide is an added conundrum for OPEC+, which on Monday and Tuesday needs to decide whether to delay a production increase slated for January -- and if so, for how long.

As OPEC+ ministers gather virtually this week, the city that traditionally hosts their meetings will be locked down. Vienna’s Christmas markets will be closed, the famous Ringstrasse boulevard silent. For oil ministers, the scene should urge caution.

But while the Austrian capital provides a dramatic example of how the second wave of the pandemic is shutting down economies in Europe and the U.S., the global picture is more nuanced.

In Asia, the situation is almost the opposite to that of Vienna. The streets in India were full during the recent celebration of Diwali; China’s Golden Week holiday saw millions take cars, trains and even planes to visit relatives across the country.

The east-west divide is an added conundrum for OPEC+, which on Monday and Tuesday needs to decide whether to delay a production increase slated for January -- and if so, for how long. Informal talks on Sunday failed to yield an agreement.

As well as the geographical split, there’s another crucial divide in the global oil market: while gasoline and diesel demand have recovered to about 90% of their normal level, consumption of jet fuel languishes at about 50%.

“The size of the shock and the unevenness of its impacts imply a recovery process which is far from smooth,” said Bassam Fattouh, the head of the Oxford Institute for Energy Studies.