Oil prices rise as OPEC+ seeks compromise on output cut extension

Oil prices rose on Thursday as the Organisation of the Petroleum Exporting Countries (OPEC), Russia and other oil producing countries resumed discussions on their policies for next year.

Brent Crude rose by 21 cents, or 0.4 percent, Reuters reported, as producers, including Saudi Arabia and Russia, disagreed on whether to extend oil production cuts.

The OPEC+ group, which combines member states of the cartel and ten other oil-producing nations, will seek to find a compromise on how best to deal with weak oil demand amid new outbreaks of coronavirus, Reuters reported.

The group was expected to maintain oil production cuts brought in during the start of the Covid-19 pandemic but a rise in oil prices following the speedy approval of a vaccine last month has some producers questioning if the curbs are needed.

Earlier talks this week produced no compromise on the issue but OPEC+ is believed to be leaning towards delaying a planned increase in oil output. 

However, public complaints from countries such as Iraq and Nigeria means such an outcome is not guaranteed, Bloomberg reported last week.

Algerian Energy Minister Abdelmajid Attar told Bloomberg News last week that OPEC+ must remain cautious. 

The Algerian minister said that the recent surge in oil prices could be fragile. Algiers currently holds OPEC's rotating presidency.

After the Covid-19 pandemic plunged the global economy and oil demand into a tailspin, OPEC+ states agreed in April to a record 9.7 million barrels a day in production cuts.

Saudi Arabia and Russia urged other oil producing states in October to adhere to the agreed output cuts, amid warnings from the International Energy Agency (IEA) of limited market capacity to absorb excess crude petroleum.

Despite the agreed cuts to production, several member countries have flouted the agreement. The UAE, Iraq and others have produced more oil than their quotas allow them to in recent months.

Aramco's chief executive was optimistic last month, predicting the crude oil market could recover to pre-coronavirus levels by 2022.

"The worst is definitely behind us", Aramco's chief executive Amin Nasser told the Energy Intelligence group.

"My prediction is hopefully we will recover by 2022."

Oil consumption dropped by an unprecedented eight percent this year. The International Energy Agency estimates that demand will return to pre-crisis levels in 2023, although some observers speculate that the world may have reached peak oil demand.

Agencies contributed to this report

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