After Saudi Arabia and the United Arab Emirates previously reached an agreement, OPEC+ announced at the ministerial meeting on July 18 that they agreed to increase the production reduction baselines of many member countries and extend the existing production reduction agreement until the end of 2022. As a result, the organization is ready to expand production from August to ease the current market tensions.
According to the statement issued after the meeting, the five countries of the United Arab Emirates, Saudi Arabia, Russia, Iraq and Kuwait will be allowed to use higher production benchmarks to reduce production from May 2022. Earlier this month, the UAE faced strong opposition from Saudi Arabia and Russia when it made its request to raise the baseline, leading to a deadlock in negotiations across the organization.
With the end of the meeting on the 18th, OPEC+ has reached an agreement on a production increase plan. In the initial plan earlier this month, OPEC+ planned to expand supply by 400,000 barrels per day from August to December this year, adding a total of 2 million barrels per day to production. But in the latest plan, OPEC+ will continue to maintain this growth rate next year until it completely exits the current production reduction scale of 5.8 million barrels per day (expected to be September 2022).
However, the statement stated that OPEC+ will evaluate market conditions and each country’s compliance in December 2021. At the beginning of this month, Brent oil prices soared to a three-year high of US$75 per day, triggering concerns that soaring prices may drag down the global economic recovery.
“As much of the world continues to reopen with the help of vaccination programs, the meeting noted continued strengthening of market fundamentals and oil demand showing clear signs of improvement, the OECD Inventories continue to decline,” the statement said.
According to the latest plan, the UAE’s production baseline will rise from the current 3.2 million barrels per day to 3.5 million barrels per day. Previously, the UAE’s request was to increase the baseline to 3.84 million barrels per day.
The baselines for Saudi Arabia and Russia will both rise from 11 million barrels per day to 11.5 million barrels per day, while the baselines for Iraq and Kuwait will each increase by 150,000 barrels per day. , to 4.8 million barrels per day and 3 million barrels per day.
In April 2020, seeing the new crown epidemic inflicting heavy damage on global energy demand, OPEC+ reached the largest production reduction agreement in history, cutting nearly 10 million barrels in May and June of that year /day output. Since then, with the gradual withdrawal of epidemic prevention restrictions, the organization has also gradually resumed production.
Brent crude, the international oil benchmark, has soared to a three-year high above $75 a barrel as demand picks up, with traders warning the market is tightening rapidly.
As demand picks up, several analysts warn the market is tightening rapidly. Therefore, there are still questions about whether the scale of OPEC+’s production increase in the next few months can cool the market.
At the beginning of this month, due to differences in production baselines, Saudi Arabia and the United Arab Emirates had a rare public quarrel, exposing long-standing conflicts within OPEC and causing the outside world to worry about whether the production reduction alliance would rupture and trigger a new round of price war.
Last week, Saudi Arabia and the United Arab Emirates held private talks, laying the foundation for reaching an agreement at this OPEC+ ministerial meeting.
“OPEC+ will continue to exist.” Saudi Energy Minister Abdul Aziz said at the press conference after the meeting, “The agreement reached today is very important and will provide The market provides guidance.”
UAE Energy Minister Mazrouei expressed his gratitude to Saudi Arabia and Russia, and said that the UAE will continue to maintain OPEC+ and is always willing to cooperate with the organization to balance the market .
“Now there is a process, and any country that is dissatisfied with the baseline can go through this process.” Abdul Aziz said that OPEC negotiations are “a art form,” he said, declining to reveal details of the process. He revealed that Nigeria and Algeria’s baselines may also be adjusted.
The next OPEC+ ministerial meeting will be held on September 1. </p
