OPEC Plus continues to gradually increase oil production

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It didn’t take long. With oil futures rising to levels not seen since 2018, officials from the Organization of the Petroleum Exporting Countries and related producers like Russia met on Tuesday and decided to stick with the plan to gradually ease production restrictions agreed in April.

OPEC meetings sometimes drag on for days, but Tuesday’s meeting took less than half an hour, Prince Abdel Aziz bin Salman, Saudi Arabia’s oil minister, said at a press conference. The rise in oil prices probably didn’t hurt.

The group, known as OPEC Plus, is still adjusting to a market that collapsed a year ago when a pandemic swept the global economy, causing a huge decline in oil production. According to a plan agreed by the group in April and confirmed on Tuesday, oil states will add 350,000 barrels a day in June and 441,000 barrels a day in July.

Saudi Arabia will also continue to spin one million barrels a day as part of the voluntary cuts it announced this year. Saudi Arabia plans to produce 350,000 barrels per day in June and another 400,000 barrels per day in July, in addition to expanding other states.

Analysts say that even with such a modest increase in production, the oil market is likely to be limited, as the growth in economic activity leads to an increase in oil consumption, burning off the glut accumulated in the first months of the pandemic. “Demand growth is outstripping supply growth,” said Anne-Louise Hittle, analyst at market research firm Wood Mackenzie, even as OPEC Plus increased.

Oil prices rose on Tuesday. Brent crude, the international benchmark, closed above $ 70 a barrel, while the US benchmark West Texas Intermediate added about 3.5% to over $ 68.50 a barrel. Both prices were the highest since October 2018.

OPEC ministers are watching indirect negotiations between Iran, a member of the cartel, and the United States, which could lead to the easing of sanctions and a sharp increase in the supply of Iranian oil to the world market. OPEC believes that the outcome of the negotiations is still unclear and that a significant increase in Iranian oil production, if any, will occur in a few months.

Prince Abdulaziz said the Iran issue was not discussed during the meeting, but that OPEC Plus will continue its recent practice of holding monthly meetings to decide on production adjustments as needed.

“We know that the current situation allows us to continue what we are planning in July,” he said.

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