Saudi Energy Minister Abdulaziz bin Salman (R) is pictured with his Russian counterpart Alexander Novak on their way to a meeting of the Saudi-Russian mixed committee on December 19, 2020.

FAYEZ NURELDINE | AFP | Getty Images

LONDON – A group of some of the world’s most powerful oil producers will hold an important meeting on Thursday to discuss reversing some of the production cuts made last year.

OPEC and its non-OPEC partners, an energy alliance sometimes referred to as OPEC +, will meet via video conference to reach consensus on how to manage supplies to the market.

The group agreed last year to cap the amount of oil produced to support oil prices as tough public health measures came with an unprecedented shock in fuel demand.

This week’s delivery decision comes at a time when oil prices are back to pre-virus levels, U.S. manufacturing is hit by freezing storms, and the coronavirus pandemic continues to cloud the outlook.

OPEC de facto leader Saudi Arabia has publicly encouraged Allied partners to remain “extremely cautious” about production policies and warned the group against complacency in attempting to address the ongoing Covid-19 crisis to manage something.

The non-OPEC leader Russia has meanwhile announced that it will press ahead with an increase in supply.

Analysts generally expect OPEC + to increase production from current levels, but the question remains how much and which countries will be affected.

At an industry event last month, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman reportedly told those trying to foresee the energy alliance’s next move: “Don’t try to predict the unpredictable.”

Both Saudi and Russia will “get what they want”

Tamas Varga, an analyst at PVM Oil Associates, told CNBC over the phone that he believed OPEC and non-OPEC partners had done an “amazing job” in realigning the market.

However, as global oil demand recovers, he warned that the recovery is still “very, very fragile”.

“What is really important here is Russia and Saudi Arabia. The break-even price on Russia’s budget is much lower than Saudi Arabia’s, so you will see some kind of gap in views between these two countries,” Varga said .

OPEC + initially agreed to cut oil production by a record 9.7 million barrels a day last year, before slashing cuts to 7.7 million and eventually 7.2 million from January. OPEC King Saudi Arabia has since made voluntary cuts of 1 million from early February to March.

An oil pump jack, also known as a “nodding donkey”, in an oil field near Dyurtyuli in the Republic of Bashkortostan, Russia, on Thursday, November 19, 2020.

Andrey Rudakov | Bloomberg | Getty Images

Alexander Novak, Russia’s deputy prime minister, appeared to be signaling Moscow’s intention to increase supply last month, claiming the market was already balanced.

“Russia wants to get back to normal production as soon as possible, while Saudi Arabia wants to enjoy high prices a little longer and keep the market on the narrow side rather than the loose side. We believe that both of them will get what they are want, “said Bjarne Schieldrop, chief commodity analyst at SEB, said in a research note.

Russia will likely be allowed to increase production, while Saudi Arabia will give back “some or possibly all” of its unilateral cut of 1 million barrels a day.

Analysts assume that OPEC + will discuss Thursday to bring up to 1.3 million barrels back to market a day.

Russia will gain momentum in its market view, but we are not seeing a complete transition.

Louise Dickson

Analyst at Rystad Energy

“Statements from Saudi Arabia suggest they are on the cautious side. Better to hold tight a little too long than encounter oversupply before Covid-19 vaccines really get the global economy and oil demand under their spell have pulled. ” Schieldrop said.

“The upcoming OPEC + meeting is therefore unlikely to ruin the Oil Party on April supply as the overall result is likely to keep the market short rather than in excess.”

OPEC + not yet ready to change course

The international reference Brent crude oil futures were trading at $ 63.01 a barrel on Tuesday morning, down nearly 1.1%, while the US West Texas Intermediate (WTI) crude oil futures were trading at $ 60.02 and fell by more than 1%.

After hitting a 13-month high last month, oil prices appeared to be prolonging losses that began last week on expectation that OPEC + could add to global supply.

“We assume that they will increase in line with their earlier contractual agreement announced in December 2020. This should not increase production by more than 500,000 barrels per day. We assume that this policy will continue to apply,” said Louise Dickson, an analyst at Rystad Energy, told CNBC over the phone.

The Organization of Petroleum Exporting Countries (OPEC) logo at its headquarters.

Omar Marques | LightRocket | Getty Images

She added that in theory OPEC could increase production by 1.3 million barrels a day, but “we don’t think they will overshoot this time.”

“Russia will gain momentum in its market view, but we do not see a complete changeover. Last year, OPEC + was really firmly under the leadership of Saudi Arabia, led the policy, made the calls, was in charge.” etc. And I don’t think after a year of such market and delivery diligence the group is ready to change course just on a whim of $ 65 Brent or an increasingly tighter oil market, “she said.