OPEC+ ups oil output by 500,000 bpd

Photo: EPA Abdulaziz bin Salman

The OPEC organization plus allied countries including Russia have agreed to raise oil production by 500,000 barrels per day effective from from January and further noted they would hold monthly meetings to clarify further raise of output levels, gently adding more crude to a global economy still suffering from the Covid-19 pandemic.

The decision followed days of serious rows over whether to increase output early next year in January and raise it at all after the pandemic slashed demand for fuels and clouded the outlook for the industry.

The OPEC members and a group of allies had made serious cuts in production last year to protect prices as the pandemic sharply reduced demand for crude. Analysts said simply extending the 7,7 million barrels per day in cuts was the course preferred by Saudi Arabia, which takes a leadership role among member countries, and also by Russia, the biggest of the non-members who have been cooperating with OPEC.

But they faced pushback from countries including the United Arab Emirates, which opposed the extension and wanted countries that had overproduced their quotas to make compensatory cuts.

Saudi Arabia’s Energy Minister Abdulaziz bin Salman alluded to hopes that the recent wave of lockdown restrictions on businesses “are not hampering demand as in the first wave” but cautioned that “the jury is still out” and that “we need to be cautious” about ramping up production.

Oil producing countries face a dilemma: producing more increases their revenues but could send prices lower, especially given still-weak demand and uncertain prospects for the speed and timing of a post-pandemic economic recovery.

Energy forecasters around the world, including those employed by OPEC, have been lowering their forecasts about how much oil will be needed. Airline travel, for example, has been dramatically reduced, and is not expected to rebound for several years.

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