OPEC and Russia resumed talks on Thursday. This is one of the efforts to determine oil policy in 2021. It is especially so after an initial round of discussions this week failed to form an agreement on how to cope with weak oil demand amid a second wave of coronaviruses.

The OPEC group and its allies or also called OPEC+, are widely expected to halt existing oil cuts. That was about 7.7 million barrels per day. If calculated those cuts are about 8 percent of global supply. The policy is implemented at least until March 2021.

The expectations about anti-viral vaccines' rapid approval created the huge impact. That prompted a rise in oil prices at the end of November. Therefore, some producers began to question the need to tighten that policy, which is supported by OPEC leader Saudi Arabia.

Approval Likely to Be Realized

An OPEC+ source said that some countries such as Russia, Iraq, Nigeria, and the United Arab Emirates within certain limits expressed a desire to supply the market with more oil by 2021. Furthermore, a delegate said that things are heading for compromise right now. 

However, different statements actually happen on the field. Two other sources showed a sense of less optimism. They say more talks are needed to address those differences. Progress on the talks does exist, but it looks like it will still take time to reach an agreement.

All of them understand that there has been progressing in discussions. It is especially between OPEC+ members on Thursday. In addition, ministers are also seen getting closer to a compromise that will break the deadlock. This was revealed by Energy Aspects. Several options appear among members.

A trusted source said that options now range from an existing policy rollover to a proposal. The goal is to reduce cuts by as much as 0.5 million BPD/month starting from January. Cutting oil production so far is considered important given the dwindling and unstable demand.

Other Options That May Appear

Energy Aspects said that it understood there were other options. One is cuts or reductions that will be in place until January. Then, the situation can be better by increasing production by 1 million barrels/day in February-March and as much as 1 million barrels/day in April.

The OPEC+ Organization must strike a fairly difficult balance. They still have to consider between raising prices enough to help their budgets, but not so much that production of U.S. rivals soars. U.S. shale production does tend to rise as prices soar above $50 a barrel.

Another challenge now also arises for OPEC+. Moscow's finances can apparently tolerate lower prices than in Riyadh. JP Morgan said it estimated that an additional 2 million barrels of production per day would cost the oil organization as much as $55 billion by 2021.

Earlier, OPEC Said It Was Ready to Cut Production

Previously, OPEC and its allies were indeed considering further reductions in their oil output. The amount is around 500,000 barrels per day (BPD) due to the impact of the coronavirus disrupting demand. This was conveyed by two reliable sources and a third industry statement.

The organization that regulates commodity is considering holding a ministerial-level meeting on February 14-15. One of the sources said that the schedule was earlier because it was previously scheduled to take place in March. Several actions must be taken as the impacts of the coronavirus pandemic.

The coronavirus outbreak in China could reduce oil demand by more than 250,000 barrels/day in the first quarter of the year. That condition also creates obstacles to prices that are already besieged by oversupply. The situation is in line with what analysts and traders said.