Oil prices enjoy modest gains this morning, as enthusiasm over a new, seemingly more efficient, vaccine has led a new price rally since yesterday.

Yet most of the good news sentiment is priced in already and now all eyes are on possible leaks from today’s OPEC+ technical meeting.

Prices took a blow and briefly reversed the gains, when a leaked OPEC document revealed the group’s pessimism for oil demand next year.

But the brief hit from OPEC’s pessimism quickly turned into renewed confidence that the alliance will take action to address the grim demand scenarios and protect the market from extra supply. 

The current OPEC+ agreement opens for an increase in production, with the collective target output rising by 1.9 million bpd from 36.2 to 38.2 million bpd from the start of Jan-21.

Under the dire market circumstances, the group is widely expected to issue a recommendation for an extension of the current output curbs by up to six months through June 2021.

Market expectations will likely be cemented later today when OPEC’s Joint Market Monitoring Committee publishes its press release and recommendations for the upcoming OPEC+ policy meeting on 30 November/1 December.

However, OPEC+ is not a single entity, but a heterogenous group of 23 countries with individual fiscal situations, government takes and upstream regulations which makes ability to comply differ widely.

So is keeping oil production stable really possible among a large group of producers that rely on oil for a significant part of their fiscal budget?

In reality, we believe OPEC+ would be able to hold back only 1.6 million bpd of the 1.9 million bpd target increases, as countries such as Iraq and Russia are already producing above their current targets.

What OPEC+ will decide to do with the roughly 2.5 million bpd of cuts the laggard countries “owe”, nobody has really talked publicly about so far. If those cuts were to be implemented as well, markets would tighten tremendously into January.

Instead, most likely these debts will be incorporated into a new agreement, which would help keep the laggards countries somewhat in check from the eyes of Riyadh.

It’s approaching OPEC “crunch time”, but the rabbit seems to already be out of the hat, with focus soon returning to Covid-19 vaccine progress and US fiscal and monetary stimulus.

Today though, traders are muttering two things, vaccine and OPEC+, an energy boost cocktail which is keeping the foot on the gains pedal for now.