OPEC and allies agree to end oil production cuts completely by September 2022

DUBAI, United Arab Emirates – The Organization of the Petroleum Exporting Countries (OPEC) and its non-OPEC allies on Sunday reached an agreement to phase out 5.8 million barrels per day of reduced oil production from ‘by September 2022. Coordinated easing of oil cuts for the group, known as OPEC +, will begin in August, OPEC said in a statement.

Overall production will increase by 400,000 barrels per day on a monthly basis from then on. The International Energy Agency estimates a deficit of 1.5 million barrels per day for the second half of this year, indicating a tight market despite the gradual increase in OPEC supply.

The 19th OPEC and non-OPEC ministerial meeting noted that global oil demand was showing “clear signs of improvement and declining OECD stocks, as economic recovery continued in most countries. regions of the world “through the acceleration of immunization programs.

The deal follows a temporary but unprecedented blockage that began in early July and saw the United Arab Emirates reject a coordinated oil production plan for the group led by its mainstay, Saudi Arabia. While the 13-member organization had previously seen disagreements, it was the first public split between the United Arab Emirates and Saudi Arabia, which are close allies.

Abu Dhabi had demanded that its own “benchmark” for crude production – the maximum volume it is recognized by OPEC as being capable of producing – be increased because that figure then determines the size of production cuts and quotas. which he must follow in accordance with the group’s production agreements. . Members reduced the same percentage from their baseline, so having a higher baseline would allow the UAE a larger production quota.

Sunday’s deal revealed basic increases for a few OPEC member states from May 2022, including the United Arab Emirates, Saudi Arabia, Iraq and Kuwait. Abu Dhabi’s baseline for oil production will drop from 3.16 million barrels per day to 3.5 million barrels per day. Saudi Arabia’s will drop from 11 million to 11.5 million barrels per day.

UAE’s support for the deal was evident in the opening statement by UAE Energy Minister Suhail Al Mazroui.

“We appreciate the constructive dialogue we have had with His Highness and OPEC,” Al Mazroui told reporters during a press call, referring to Saudi Energy Minister Abdulaziz Bin Salman. “I confirm that the UAE is committed to this group and will always work with it and within this group to do our best to achieve market balance and help everyone. The UAE will remain a committed member. of the OPEC alliance. “