The Strategist

OPEC+ is willing to slowly increase production

07/02/2021 - 05:17

OPEC+ countries could not meet the standard timeframe of the 1 July summit to formulate the bloc's policy to supply the global oil market for the next six months.

Teo Romera
Teo Romera
The OPEC+ monitoring committee did not recommend an increase in oil production due to a lack of consensus within OPEC. Even before the committee meeting it appeared that the deal participants had reached an agreement recommending an easing plan for 2021, which envisages a monthly even increase in production by 400 thousand barrels per day (bpd) - a total of 2 million bpd by the end of the year. 

OPEC+ countries are discussing production increases amid expectations of a 5m bpd increase in oil demand in the second half of the year. Working out a common OPEC+ position took longer than usual this time: the monitoring committee on the deal was first postponed from 30 June by a day, and then the meeting was postponed by another couple of hours. Advocates of the restrained approach to quota increases pointed to the risks of new lock-ins due to the coronavirus and the lifting of sanctions on Iran, which would allow it to start raising oil production.

Since last May, OPEC+ countries agreed to cut production by 9.7m bpd due to a slump in oil demand amid the coronavirus pandemic, the quota has since fallen to 5.7m bpd: the alliance last agreed to cut 2m b/d in May-July. The current arrangements are in place until April next year and if the current OPEC+ plan is implemented by early 2022 the total production cut will be 3.8m bpd. This would mean that it is highly likely that the OPEC+ agreement will go beyond April 2022.