After the failure of negotiations earlier this month, members of the Organization of the Petroleum Exporting Countries (OPEC) and their ten allies via the OPEC + agreement agreed on Sunday to continue to modestly increase their production from August, OPEC announced.
In order to help fuel the global economic recovery as the pandemic eases, the agreement calls for the 23 members of the Opep + group to increase their production by 400,000 barrels of oil per day (bpd) each month from August, OPEC stressed in a statement after a videoconference meeting.
Compromise on quotas
The organization “will assess the development of the market” in December, added OPEC, headquartered in Vienna. The agreement reached on Sunday also postpones the deadline for the production cap from April 2022 to the end of 2022. A first meeting scheduled for early July around this agenda had to be canceled due to a disagreement between the United Arab Emirates and the rest of the alliance on a technical point: its reference production volume.
This threshold fixed on October 2018 corresponds for Abu Dhabi to 3.17 million barrels per day. It does not effectively reflect the country’s full production capacity, which rose to more than 3.8 million barrels per day in April 2020, on the eve of the cartel’s drastic cuts. Sunday’s discussions led to a compromise, according to which the UAE’s production quota will be raised to 3.5 mbd in May 2022. The quotas of several other countries will also be adjusted: Iraq, Kuwait, and so on. than Saudi Arabia and Russia.
Return to pre-pandemic production
Saudi Energy Minister Abdelaziz bin Salman declined to say how these new quotas were set, saying it was part of the “search for consensus.” “Today’s meeting once again confirms our desire to be constructive and to find a consensus”, reacted for his part Russian Deputy Prime Minister Alexandre Novak, on the Rossia 24 channel. allow Russia to produce an additional 21 million tonnes of oil in 2021 and 2022. The cartel’s goal is to return to pre-pandemic production levels, as the alliance is still pumping 5.8 million bpd of less than before the pandemic.
The strategy that prevailed on Sunday is part of what has been the strength of the cartel’s policy since May: gradually reopening the black gold tap after having tightened it very strongly at the start of the pandemic in the face of dying demand. With some success in terms of prices – from the producers’ point of view – since they have climbed. Oil prices, already declining amid concerns about the global economy, had indeed collapsed in April 2020 with the spread of the coronavirus which has challenged global consumption, transport and supply chains.
See you on September 1st
The Opep + alliance committed in April 2020 to voluntarily withdraw 9.7 million barrels per day from the market and then gradually reintroduce them by the end of April 2022. This deadline was finally extended by several months, until December, because it seemed short at the current rate of reopening of the valves, slowed down several times because of the upheavals of the health crisis. OPEC + is also faced with a complex equation, between a recovery in demand although still fragile, a probable return in the medium term of Iranian exports and high prices which are causing the dissatisfaction of certain large importers such as India.
OPEC + country ministers have met frequently since spring 2020 to assess the state of the market. Their next meeting is scheduled for September 1, according to the OPEC statement on Sunday. The deal reached Sunday was expected by analysts because “a flurry of talks took place on Saturday to try to bridge the disagreement,” said Herman Wang, energy industry specialist at S & P Global Platts, in a tweet.