OPEC+ countries agree to boost production until end of September 2022
OPEC and a group of allied oil producers agreed to boost production by 400,000 barrels a day through the end of September 2022, according to people familiar with the deal, moving to restore capacity they cut at the start of the pandemic as crude demand comes back.
Earlier this month, the Organization of the Petroleum Exporting Countries and a Russia-led group of non-OPEC producers—together called OPEC+—came close to agreeing to a deal to boost output starting next month. That deal was held up after the United Arab Emirates refused to sign on unless it was allowed to pump more of its own crude inside the complex quota system of the group.
Last week, Saudi Arabia, OPEC’s de facto leader, and the U.A.E. agreed to lift that quota next year, paving the way for Sunday’s meeting and an official deal by the group to boost overall output. The deal that was hammered out earlier this month calls for OPEC+ to lift production by about 400,000 barrels a day each month into next year, eventually reaching the group’s pre-pandemic output.
It is unclear whether the group will agree on the exact same deal. Most big national oil companies have already committed to long-term sales for August, meaning they might not be able to start to unleash new barrels until September. Other OPEC+ members could be emboldened by the U.A.E. move to make demands of their own in Sunday’s meeting.
OPEC+ slashed production early last year, cutting 9.7 million barrels a day of its collective output, equivalent to about 10% of 2019 demand. It has restored about 4 million barrels of that.
In recent months, demand for crude has accelerated as many economies, particularly in the developed world, start to hum again, after wide-scale vaccination drives and moderating new caseloads in many places. In its first 2022 forecasts for the global oil market, OPEC said last week it expects the world’s appetite for crude to rise by 3.3 million barrels a day to average 99.9 million barrels a day next year. That is about the level of demand pre-pandemic.
The prospect of an OPEC deal and a return of supplies has already led to a drop in oil prices. which have recovered strongly this year. Brent, the international benchmark, and West Texas Intermediate have both fallen about 5% since the Saudi-Emirati compromise Wednesday. Brent closed above $73 a barrel and WTI finished above $71 a barrel Friday, both off recent highs.
The compromise between Saudi Arabia and the U.A.E. patched up for now what had turned into an acrimonious and public spat between two of OPEC’s closest traditional allies. While Saudi Arabia is far and away the bigger producer and regional power, the U.A.E. is one of just a few OPEC members with so-called spare capacity—barrels it can turn on and off quickly.