The Organization of the Petroleum Exporting Countries (OPEC) group of oil-producing countries and its allies agreed on Tuesday to maintain their planned production increases, as pandemic-hit demand for crude recovers.
The 23-nation OPEC+ alliance implemented sharp output cuts to support prices after the coronavirus pandemic crushed the global economy last year.
But since early May the cartel has started implementing more generous production increases as oil prices have recovered and the health situation improves in developed economies. At the end of a short meeting on Tuesday which lasted barely half an hour, the group agreed to continue output rises until July adding up to 1.2 million barrels per day (bpd).
However, the alliance took no decision on what policy to follow from August onwards, and did not discuss the possibility of Iranian oil returning to the market in the coming months. OPEC Secretary General Mohammad Barkindo said on Monday that the alliance’s policy continues to be a “reliable and crucial tool for oil market stability”.
Read more: Oil rises towards $66 ahead of OPEC+ meeting
Among OPEC’s allies, Russia has been pushing for faster rises in output but traditional OPEC kingpin Saudi Arabia supports a much more cautious approach, pointing to the surge of coronavirus infections in parts of Asia.
Riyadh’s caution comes after markets have been shaken by a vicious third wave of the virus that has swept through India, the world’s third-biggest consumer of crude after the US and China.
Several other Asian countries have also had to adopt virus-related restrictions, representing a brake on demand.
OPEC has remained optimistic in its predictions for 2021, expecting demand to reach 96.5 million bpd, an increase of six million on 2020 levels.
This, combined with OPEC’s previous policy of production restraints, means analysts expect the market to tighten sufficiently by August for demand to start outstripping supply.
Published in The Express Tribune, June 2nd, 2021.
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