Oil-producing countries grouped together under the OPEC+ alliance led by Saudi Arabia and Russia agreed on output increases as of next month at a ministerial meeting on Thursday.
A statement from the alliance said that they had agreed to boost output by “no more than 0.5 million” barrels per day (bpd) in May, June and July.
The decision comes despite the expectation ahead of the meeting that the bloc would err on the side of caution.
Addressing reporters after the meeting, Saudi Energy Minister Prince Abdelaziz bin Salman stressed that the decision could still be “tweaked” in the alliance’s monthly meetings.
Before the meeting Prince Abdelaziz said that “the reality remains that the global picture is far from even, and the recovery is far from complete”.
Salman praised the OPEC+ alliance nations for more than fulfilling their commitments to restrain output.
Under its current agreement, the OPEC+ group — made up of the Organization of Petroleum Exporting Countries and its allies including Russia — is enforcing drastic cuts in production, meaning seven million barrels that could be shipped to markets every day are being left in the ground.
In addition, Saudi Arabia has volunteered to cut its own output by one million barrels per day (bpd) to help avoid oversupplying a market suffering from a collapse in demand due to the coronavirus pandemic.
The cuts were aimed at avoiding limited storage capacity being saturated and supporting prices — currently hovering around $60 per barrel.
– Russian optimism –
Market analysts had widely tipped OPEC+ to roll over the production cuts for another month, especially as more nations are experiencing an upswing in Covid cases.
Russia’s Deputy Prime Minister Alexander Novak was more optimistic in his opening comments.
“The evolution of the vaccination campaign is making progress and allows us to look towards the future with optimism, even if, of course, we shouldn’t forget that there remain many uncertainties ahead,” Novak was quoted as saying by Ria Novosti news agency.
“We also note that the economy continues to improve,” he added.
But with Europe returning to lockdown and infections sweeping through India, a country that until the pandemic was an important source of demand growth, experts are now seeing a slower recovery for the crude market.
The International Energy Agency (IEA) reflected this more downbeat outlook in forecasts contained in its last report this month.
It estimated that global demand could take another two years to get back to its pre-crisis levels.
Benchmark crude contracts Brent and WTI were both up nearly 2 percent as the OPEC meeting got underway.