OPEC+ to increase oil production as of May
The group’s decision surprised traders and analysts
In response to the improving market situation, the global alliance of top crude exporters has finally chosen to ease its output restrictions. However, the alleviation will be modest and gradual, and the alliance has reserved the right to “tweak” the decision during the following meetings.
On 1 April, oil-producing countries grouped under the OPEC+ alliance agreed to limited output increases starting from next month, says Yahoo Finance citing AFP. The current agreement of the group, which includes the Organization of the Petroleum Exporting Countries and its allies headed by Russia, envisages drastic output cuts of seven million bpd aimed to avoid saturation of storage capacity and support prices.
Now the world’s top oil producers decided to collectively increase output by 350,000 bpd in May, another 350,000 bpd in June and 450,000 bpd in July. The alliance cited “improvements in the market supported by global vaccination programmes and stimulus packages in key economies” in its official statement but also noted that “the volatility observed in recent weeks warrants a continued cautious and vigilant approach in monitoring market developments”.
“The OPEC+ decision for a gradual output increase surprised some energy traders,” commented Edward Moya, a market analyst at Oanda foreign exchange company. He said that expectations were for no increase in May but a stronger hike in June.
The decision was all the more unexpected, as before the meeting, Saudi Minister of Energy Prince Abdulaziz bin Salman stated that the global picture was far from even, and the recovery was far from complete. He praised the OPEC+ nations for more than fulfilling their current commitments to restrain output and added that “until the evidence of the recovery is undeniable, we should maintain this cautious stance”. After the meeting, the Saudi minister stressed that the decision could still be “tweaked” during the next meetings.
Meanwhile, his Russian counterpart, the country’s Deputy Prime Minister Alexander Novak expressed much more optimism about the future. In an interview after the meeting, he said that the tone of Thursday’s gathering was more positive than those at the beginning of the year. According to Novak, oil stocks “have considerably fallen”, while vaccination against COVID-19 “is already yielding positive results so that demand is recovering”. “We think the situation on the market will normalise, and that we’re going to see positive indicators,” he summarised.