The Organisation of the Petroleum Exporting Countries (Opec), along with 10 other states led by Russia (known as OPEC+), has agreed to continue increasing the world’s supply of oil in an attempt to bring down the commodity’s price.
The decision followed the 19th Opec and Non-Opec ministerial meeting, which concluded on Sunday and was held via teleconferencing.
In a statement released on its website, the announcement was made that overall production was to be increased by 400,000 barrels a day on a monthly basis, beginning in August. The intention is to phase out previous cuts.
According to CNBC: “OPEC+ agreed in the spring of 2020 to cumulatively cut a historic nearly 10 million barrels per day of crude production as it faced a pandemic-induced crash in oil prices. The alliance gradually whittled down the cuts to about 5.8 million barrels per day.”
Full to the brim
Oil prices had fallen before the announcement. According to The Wall Street Journal, “The prospect of an Opec deal had already led to a drop in prices, which have recovered strongly this year. Brent, the international benchmark, and West Texas Intermediate have both fallen about 5% in recent days, as hope grew for an Opec deal. Brent closed above $73 a barrel, and WTI finished above $71 a barrel Friday, both off recent, multi-year highs.”
That same outlet provided some useful context. “The deal marks a turning point for the oil industry, which went into a tailspin in the early months of the pandemic,” it wrote. “Economies around the world went into hibernation, and oil demand sank. At one point, oil markets were so chaotic that futures for US benchmark crude briefly fell below zero. Oil-storage facilities were brimming full, and producers, trader and buyers were storing oil at sea because they had no need for it.”
The decision by Opec and its allies follows a failure to agree policy back in July.
At that time the Financial Times reported: “Opec and its partners outside of the cartel met virtually for preliminary gatherings on Thursday to discuss gradual monthly production increases of several hundred thousand barrels a day between August and December.
“But they were unable to reach a deal on production levels, postponing an official meeting of the so-called Opec+ group until Friday afternoon. The UAE has emerged as a roadblock, having raised concerns about its individual output quota.”