OPEC met via videoconference to discuss whether to start increasing oil production in January. But the economic slowdown caused by the pandemic continues, and oil production could make the price drop.
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OPEC has a big decision to make. The powerful Saudi-led cartel of oil-producing nations had been planning to pump more oil starting in January, but now OPEC is having second thoughts. NPR's Camila Domonoske reports.
CAMILA DOMONOSKE, BYLINE: This spring the coronavirus pandemic caused an unprecedented drop in oil demand, so crude prices fell off a cliff. OPEC responded with its largest-ever cuts to oil production to prop prices up, and it worked. Now the cartel faces a big decision. Is oil production ready to start a return to normal, or are those cuts still needed? Abdelmadjid Attar opened today's OPEC meeting on a cautionary note.
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ABDELMADJID ATTAR: The pandemic continue to rage, with cases soaring in many region around the world.
DOMONOSKE: Attar is the Algerian minister of energy and the president of the OPEC conference. He emphasized that the pandemic is far from over. Effective vaccines will encourage people to resume travel and push oil demand up, but deployment of vaccines will take time.
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ATTAR: Its effect will likely begin to be significantly apparent in the second half of 2021.
DOMONOSKE: Oil prices have been rising over the last few weeks because vaccine news is raising hopes that demand will pick up. But if OPEC raises production before demand has actually recovered, all that recent price growth could be wiped out.
BJORNAR TONHAUGEN: Prices will go down. There will be a big disappointment.
DOMONOSKE: Bjornar Tonhaugen is the head of oil markets at Rystad Energy. He says most analysts think extending current cuts for three months is the path of least resistance for OPEC. But surprisingly, the meeting on Monday adjourned with no decision at all.
TONHAUGEN: Which then signaled that deliberation and negotiation were a bit more difficult than they probably would like them to be.
DOMONOSKE: Some members of OPEC badly want to raise production because their national budgets are hurting. And in a constant OPEC headache, every member wants to make sure that nobody else is cheating. Member countries will gather on Tuesday to negotiate some more, as will OPEC allies like Russia, who need to approve any deal. All these oil ministers used to fly on fuel-guzzling planes to meet in Vienna. But this year, like a lot of us, they're dialing into video chats.
Camila Domonoske, NPR News.
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