The Organization of Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC +, decided to increase oil production “gradually” from May to July, with concerns about demand still on the organization’s radar.
Brent futures due in May rose 3.8% to $ 65.08 a barrel this Thursday (1). WTI futures were up about 4% at $ 61.63 a barrel.
The decision was taken at a virtual meeting of the member countries and announced on Thursday, April 1, via an official statement. The note, however, does not inform precisely the amount of increase in the offer.
“The meeting approved the adjustment of production levels for May, June and July 2021, continuing to respect the mechanism… of holding monthly meetings to assess market conditions and decide on adjustments in production levels for the following month, being that each adjustment will not exceed 500 thousand barrels per day ”, the official statement merely says.
According to a report by Dow Jones Newswires, citing sources, the increase in supply will be 350 thousand barrels per day (bdp) in May and June and 450 thousand bpd in July.
To justify the increase in production of the commodity, OPEC + says, in the official statement, that there were improvements in the oil market thanks to the immunization process against covid-19 and to economic stimuli announced in countries like the United States. On the other hand, it speaks of “volatility” that demands “a cautious approach”.
Saudi Arabia’s energy minister, Abdulaziz bin Salman al-Saud, said at a news conference on Thursday that the rise in oil supply was a “very conservative” decision that “can be adjusted”.
“OPEC + can still adjust production by more or less 500 thousand barrels per day,” said the minister, who leads the group. “The voluntary cut in production in Saudi Arabia will be gradual, keeping an eye on the market’s reaction. If production is in line with the market view, great; if not, we adjust ”, he added.
Saudi Arabia is the largest oil producer in the world and has made a voluntary production cut of 1 million barrels per day (bpd) since January, a condition that will be maintained in April.
Abdulaziz denied, at the press conference, that there was pressure from oil-consuming countries to increase supply and guaranteed that a good part of the new oil quota to be offered to the market, in this new decision, will be destined for OPEC member countries.
Eurasia Group analysts noted that the last month in the global oil markets “had a significant level of volatility” and a settlement that brought quotations for brent crude futures from $ 70 to $ 62 a barrel, before stabilizing around $ 64 in the past few days.
“The Suez Canal incident probably helped many oil producers as it prevented a further drop in prices,” analysts at the Eurasia Group said in a note, as CNBC points out.
“But, again, it is far from clear that a sustainable recovery would justify a strong cycle of gradual return to production to be followed each month. Saudi Arabia’s caution about the global economic recovery has been justified in many ways, ”they added.
(with Estadão Content, Dow Jones Newswires)
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