<div id=”js-article__body” itemprop=”articleBody” data-sbid=”WP-MKTW-0000218553″>
The Organization of the Petroleum Exporting Countries and its allies, known collectively as OPEC +, announced Thursday that they will gradually increase production from May to July, easing the size of their previous production cuts. Saudi Arabia will also reverse its voluntary cuts over the three-month period.
“The deal supports oil prices, but should also help avoid a sharp rally as oil demand recovers,” Ann-Louise Hittle, Wood Mackenzie Vice President, Macro Oils, said in an emailed comment. . Wood Mackenzie forecasts a “strong recovery in US third-quarter oil demand” and expects total global oil demand to gain 6.2 million barrels a day year-over-year in 2021, he said. During a press conference, Saudi Arabia’s Energy
Minister Prince Abdulaziz bin Salman said that OPEC + will increase daily oil production by 350,000 barrels in May, 350,000 barrels in June and 441,000 barrels in July. OPEC + was withholding roughly 8 million barrels per day of production, 1 million of which represented a voluntary cut from Saudi Arabia. However, Prince Abdulaziz also said that Saudi Arabia will gradually reverse that voluntary cut, which it
announced at the January meeting. It
will facilitate the daily reduction by 250,000 barrels in May, by 350,000 barrels in June and by 400,000 barrels in July. That means the Saudis would essentially stop their voluntary cut in July. The group will continue to assess oil market conditions on a monthly basis and decide whether to adjust production, up or down, for the following month by no more than 500,000 barrels per day. OPEC + also extended the amount of time countries have to compensate to produce above their quotas until the end of September. The production decision “shows that patience was exhausted among many producers, who could not accept that some countries, and mainly Russia, were allowed to constantly increase their production while others kept it stable,” said Louise Dickson, an analyst at Rystad Energy oil markets. “Increased production is not likely to be detrimental, especially for June and July, as demand is likely to increase as well, and that is reflected in the market reaction, which is not one of panic to lower price levels. “he said in an emailed comment.
“” Increased production is unlikely to be detrimental, especially for June and July, as demand is likely to increase as well … “- Louise Dickson, Rystad Energy
In Thursday’s trading, May West Texas Intermediate crude CLK21, + 3.99% CL.1, + 3.99% added $ 2.31, or 3.9%, to $ 61.47 a barrel on the New York Mercantile Exchange, after touching a new intraday high at $ 61.59 after OPEC + announcement. Brent crude BRNM June 21, + 3.52% BRN00, + 3.52% added to $ 2.11, or 3.4%, to $ 64.85 a barrel on ICE Futures Europe. “The bottom line is that the oil market is getting another nearly 2 million barrels a day for the next three months,” said Dickson. “We always knew these barrels would come back eventually, the question now is whether they will arrive too soon compared to what the market can digest.” OPEC + will hold its next meeting on April 28.