With Brent trading up at 67.71 a barrel of crude, almost a 26% rally from year-end, OPEC+ it would appear have decided to cancel their meeting set for April. This means any further supply curbs will now be delayed until their next scheduled meeting in June.
At the heart of the delay is rumoured to be the Russian and Saudi relationship, the two most powerful members of the 24 nation coalition. Saudi have already cut production down to less than 10mln barrels a day more than agreed while Russia has been slow to move to their agreed level and are just about halfway to their targeted cut level.
Indeed there appears to be an imbalance at the heart of the matter which seems to be derived from the differing needs of the two nations. Russia in their budget used just $40 a barrel and is therefore quite sanguine about further cuts to production with the current pricing while Saudi is thought to need $95 a barrel to balance this year’s budget and cover further government spending this year.
Another problem looming for OPEC could be the NOPEC legislation in the US which would allow the US government to sue the cartel. US politicians have tried several times since 2000 to pass the bill but have been stopped previously by past presidents George W Bush and Barack Obama who threatened to use their veto. The risk here of course is Donald Trump, who constantly calls for OPEC to boost supply and reduce the cost of crude, although he has remained silent on the NOPEC legislation we can all appreciate the obvious risk the president represents.
The UAE oil minister and former president of OPEC warned US financiers at a conference in Houston Texas just last week; he told the group that any NOPEC law would stop OPEC from working, leading to all members to raise production causing a crash in prices and the first casualty of such a move would be the US shale market and their financiers. Well minister, no pulling any punches there.