OPEC+ is moving towards gradually adding about 2 million barrels per day (bpd) to the oil market from August to December, an OPEC+ source told Reuters as the group eases back on output curbs amid a recovering global economy and an oil price rally.
Monthly increases would be 0.4 million bpd under the plan, the source said, adding that an OPEC+ ministerial committee had proposed this to the wider group. Another source said Saudi Arabia and Russia, the biggest producers in the OPEC+ alliance, had reached a preliminary agreement.
Responding to oil demand destruction caused by the COVID-19 crisis, OPEC+ last year agreed to cut output by almost 10 million bpd from May 2020, with plans to phase out the curbs by the end of April 2022. Cuts now stand at about 5.8 million bpd.
Oil prices extended gains on news of the latest increase plans because some traders had expected a bigger output rise in August. Brent crude was trading above $75 a barrel on Thursday, close to 2-1/2 year highs.
The proposed increase “would keep the market tight this summer, with still rising demand over the coming weeks,” UBS analyst Giovanni Staunovo said, adding that consensus had been for an addition of 0.5 million bpd a month or slightly more.
Ministers from the Organization of the Petroleum Exporting Countries, Russia and their allies, a group known as OPEC+, began online meetings on Thursday. Sources said they would decide policy from August and could also consider extending the duration of their overall pact.
The OPEC+ source said active supply management could be extended until the end of 2022, although it was not immediately clear if that idea had secured unanimous backing in the group.
OPEC finished its meeting earlier on Thursday. An OPEC+ ministerial committee met after that, ahead of a full meeting of OPEC+ ministers due later on Thursday.
An OPEC+ technical panel on Tuesday had said it expected oil demand to grow by 6 million bpd in 2021 but flagged risks of a glut in 2022, saying there were “significant uncertainties” including an uneven global recovery and rising cases of the delta variant of the coronavirus.
Saudi Arabia, Russia and other OPEC+ members have been cooperating closely since their big falling out in March 2020 just before the pandemic sent oil prices diving. The price crash drove them back together to forge their supply pact.