Topline
The Organization of Petroleum Exporting Countries (OPEC) and its allies have agreed to boost oil production gradually over the next three months in a major bet that the industry will bounce back as vaccines are distributed and the global economy reopens, even as new cases of the virus are rising across the globe.
Prince Abdulaziz bin Salman Al-Saud, Minister of Energy of Saudi Arabia, chairs a virtual summit of … [+]
Key Facts
The cartel, which includes the members of OPEC as well as Russia, will add about 350,000 barrels per day in production beginning in May, the Wall Street Journal reported.
Te group will add another 350,000 barrels per day in June and then 450,000 barrels per day in July, according to the Journal.
WTI futures, the American oil benchmark, rose 2.4% on the news to trade at $60.61 per barrel on Thursday afternoon, while Brent crude, the international benchmark, rose 2.2% to trade at $64.12 per barrel.
Big Number
5.5 million barrels per day. That’s how much global demand for oil is expected to rebound in 2021, according to the International Energy Agency, up from an 8.7 million barrel per day contraction in 2020. “A return to growth lies ahead,” the IEA wrote in its most recent market report, citing colder weather at the start of the year, improved industrial activity in the United States, and the ongoing rollout of vaccines.
Crucial Quote
Not everyone is that bullish on the market. “The reality remains that the global picture is far from even, and the recovery is far from complete,” Prince Abdulaziz bin Salman, Saudi Arabia’s oil minister, said Thursday, according to the New York Times. The prince argued for maintaining a “cautious stance” until “evidence of the recovery is undeniable,” the Times reported.
Key Background
OPEC and its allies slashed production over the past year in an attempt to prop up prices and prevent a supply glut as the coronavirus pandemic destroyed global demand for fuel and petroleum. The group is now withholding about 7 million barrels per day from the market, along with another million barrels per day withheld by Saudi Arabia alone, according to Reuters. The group’s production cuts helped push Brent crude prices to $70 per barrel last month—their highest level in more than a year.
Further Reading
OPEC+ Agree to Gradually Boost Oil Output Over Next Three Months (Wall Street Journal)
Oil Rebounds Above $50 For The First Time In Months As Saudi Arabia Says It Will Cut Production By 1 Million Barrels A Day (Forbes)
OPEC And Its Allies Are Ready To Boost Production, But Here’s Why An Oil Market Recovery Isn’t Guaranteed (Forbes)
Here’s Why Oil Prices Are Plummeting Again (Forbes)
