OPEC+ expressed growing confidence in the global economic recovery by agreeing to increase oil production gradually in the coming months.
Before Thursday’s meeting, the cartel had been widely expected to maintain its cautious stance by rolling over the current supply cuts, just as it did last month. However, Saudi Arabia and its allies showed they are more convinced now that fuel demand is on a firmer footing after a yearlong beating from the COVID-19 pandemic.
As countries like the US rapidly expand their vaccination programs, there are growing signals that the oil market is healing.
Last week, US refiners processed the most crude since the pandemic started as they prepared for a surge in driving and flying.
Although European oil consumption is weak as France, Germany and Italy extend or impose new lockdowns, demand indicators from China remain strong.
The global seven-day average of commercial flights taking off each day hit a post-pandemic high of 77,708 on Wednesday, according to data from Flightradar24.
“Even in those sectors that were badly hit such as airline travel, there are signs of meaningful improvement,” Saudi Arabian Minister of Energy Prince Abdulaziz bin Salman said at the opening session of the OPEC+ videoconference.
OPEC and its allies plan to add more than 2 million barrels a day to world oil supplies from next month to July. That would restore about a quarter of the crude they are still withholding after making deep cuts a year ago in response to the pandemic.
With oil prices firmly above US$60 a barrel, the group has been under pressure to open the taps. Other commodity costs have also been soaring, leaving central banks from the US to China grappling with the risk of higher inflation just as their governments are pouring trillions of US dollars into fiscal stimulus.
Major consumers, including the US and India, have been calling on OPEC+ to keep prices under control.
US Secretary of Energy Jennifer Granholm phoned her Saudi counterpart on the eve of the cartel’s meeting to highlight the importance of affordable energy.
Prince Abdulaziz told reporters that they did not discuss the oil market.
The 23-nation coalition is to boost output by 350,000 barrels a day next month, add the same volume again in June and increase by 450,000 barrels a day in July, Prince Abdulaziz told reporters after the meeting.
On top of that, Saudi Arabia is to roll back its voluntary extra 1 million barrel-a day cut, adding 250,000 barrels a day next month, 350,000 in June and 400,000 in July, he said.
“OPEC+ agreed today to cautiously increase production quotas,” Wood Mackenzie Ltd vice president of macro oils Ann-Louise Hittle said in a note. “The agreement is supportive of oil prices, yet should also help avoid a sharp spike upward as oil demand picks up.”
Brent crude rose after the decision, climbing 3.2 percent to US$64.75 a barrel in London.
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