OPEC+ agreed to increase production over the next three months, cumulatively by more than 2 million barrels per day from May to July.
The Organization of the Petroleum Exporting Countries (OPEC) and partner countries have agreed to gradually increase oil production over the next three months, a move prompted by a surge in oil prices, a U.S. call to keep energy prices at affordable levels, and an expression of greater confidence in the global economic recovery.
Before Thursday’s meeting, it was widely believed that OPEC+ would remain cautious and extend current production limits, but for the second time in less than a month, the group made a decision the market did not expect. Saudi Arabia’s energy minister told reporters after the meeting that the 23 member states, led by the Shahudi and Russia, agreed to increase production by 350,000 barrels per day in May, another 350,000 barrels in June and about 440,000 barrels in July.
In addition, the Shahudi will withdraw an additional 1 million barrels of voluntary production cuts in stages, divided into an increase of 250,000 barrels in May, 350,000 barrels in June, and 400,000 barrels in July.
The cumulative May-July production increase of more than 2 million barrels per day means that the organization will recover about a quarter of the production that was drastically cut a year ago due to the new crown epidemic. London’s Brent crude oil s rose 3.2 percent to $64.75 a barrel after the decision to increase production was announced.
The decision to increase production is a bet that vaccine administration in major global economies will accelerate this summer and that more people will be able to travel, increasing demand for energy. Of course there are external pressures as well. U.S. Energy Secretary Jennifer Granholm said she and Saudi Energy Minister Prince Abdulaziz Bin Salman had a “positive” call before the meeting. “We reiterate the importance of international cooperation to ensure consumers have access to affordable and reliable sources of energy,” she tweeted.
Ann-Louise Hittle, vice president of macro crude at Wood Mackenzie Ltd, said, “OPEC+’s decision to agree to a cautious increase in production will give support to oil prices, while at the same time it should prevent prices from rising too quickly as demand for crude heats up.”
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