OPEC and its allies agree to boost production and rebound in on-demand betting

The Organization of the Petroleum Exporting Countries and a group of other major Russian-led producers agreed to increase production in May by 350,000 barrels a day, and by the same amount again in June, delegates said. They then agreed to increase production by an additional 450,000 barrels per day in July. Saudi Arabia, meanwhile, has agreed to start easing the separate one-million-barrels-per-day unilateral cuts it implemented earlier this year. He plans to end those cuts completely by the end of July, delegates said.

The agreement Thursday between the two groups, jointly referred to as OPEC +, was a compromise between Saudi Arabia, the de facto leader of OPEC, and Russia. Saudi Arabia had sought to maintain the cuts, skeptical of a rapid return in demand for oil during the pandemic. Russia, meanwhile, said the world already needs more oil to fuel resurgent economies in many regions.

The move is another blow to OPEC’s zigzag oil strategy over the past year, underscoring the difficulty among group forecasters – and elsewhere – to call the start of a sustained global recovery. of the pandemic.

Ahead of the meeting between the two groups, Saudi Arabia initially supported plans to keep production unchanged, delegates said. The decision to increase production “was a complete U-turn,” one said. Throughout the pandemic, the group appeared to switch sharply from optimism to pessimism about the prospects for a post-pandemic economic recovery and a strong rebound in demand for oil. Saudi Arabia urged to remain cautious, while Russia insisted on increasing production.

The rift was visible before Thursday’s meeting. Saudi Energy Minister Abdulaziz bin Salman has warned that “the seas remain rough” in terms of stabilizing the oil market. Russian Energy Minister Alexander Novak said oil markets were under-supplied by around two million barrels a day, and “it is important not to let the market overheat.”

Keeping tight control over production can drive up prices, but it can also reduce the income of many independent Russian producers. The oil supply lines were also recently disrupted by the six-day shutdown of the Suez Canal, offering another case to loosen the taps.

Many forecasters are bracing for a strong global recovery this year, but the picture remains uncertain. Oxford Economics predicts global growth of 6% in 2021, the fastest rate in nearly half a century, as Covid-19 vaccination campaigns lift pandemic restrictions and restart businesses in certain places. In China, domestic consumer spending and overseas demand for Chinese-made products contributed in March.

The US economy is recovering, with an acceleration of the vaccination campaign progressing relatively well. Americans are increasing their spending, especially on in-person services which have been battered by the pandemic. Yet the clouds remain. Reported cases of Covid-19 in the United States remain high and have increased steadily despite the vaccine rollout. Sharply rising cases across much of Europe trigger new Covid-19 restrictions and threaten a deeper-than-expected double-dip recession.

Traders took the OPEC trigger in the wake, with analysts saying the boost was measured. Brent, the international benchmark for crude, rose 1.2% to $ 63.52 per barrel. Futures on West Texas Intermediate, the US benchmark, were up 1.6% to $ 60.08 a barrel.

“You recognize that this is a laddered return that can be quite easily reversed,” said Helima Croft, chief commodities strategist at Canadian brokerage RBC.

As Covid-19 began to shut down economies, block flights and shut down businesses, OPEC and its allies put aside a bitter price war and cut nearly 10 million barrels of crude a day, or about 10% of the pre-pandemic demand, of their collective production. . Since then, the group has agreed in fits and starts to restore some of it – around 3.15 million barrels a day, including Thursday’s new barrels.

Saudi Arabia surprised markets in early January by agreeing to act unilaterally and cut another million barrels of its own production to help stabilize markets at a time when it felt vaccine optimism was premature and as cases in Europe and the United States were skyrocketing.

—David Hodari contributed to this article.

Write to Summer Said at [email protected] and Benoit Faucon at [email protected]