The ministers of the OPEC+ came to an agreement on Sunday to strengthen oil supply starting August. This is in an effort to ease the prices that have soared to 2-½ year highs. Meanwhile, the global economy picks up from the ravages of the COVID pandemic.
The OPEC+ agreed on new production allocations from May 2022. UAE’s Energy Minister Suhail bin Mohammed al-Mazroui said that they are happy with the deal. No comments, however, were received from Saudi energy minister Prince Abdulaziz bin Salman about how the compromise was reached.
In 2020, the group which includes OPEC countries and allies like Russia cut production by a record 10 million barrels per day (bpd). That was amid a decline in demand and collapsing prices due to the pandemic. Moreover, it has gradually restored some supply to leave it with a reduction of about 5.8 million bpd.
In a statement, OPEC said that from August until December 2021, the group will increase supply by a further 2 million bpd or 0.4 million bpd a month. Its objective was to phase out cuts in full by around September 2022.
They have also agreed to extend their overall pact until the end of 2022, when the date planned was previously in April 2022. The move was to provide more room for manoeuvre in case global recovery gets impacted again by emerging COVID variants.
On the contrary, the UAE had objected to extending the pact to December 2022 without getting a higher production quota.
To ease the disagreement, the group agreed new output quotas for several members from May 2022. It has included the UAE, Saudi Arabia, Russia, Kuwait and Iraq for this.
Cuts are being calculated from UAE’s baseline production. The country can expect to see its baseline production rise to 3.5 million bpd from May 2022 from today’s 3.168 million.
As for Saudi and Russia, from their current 11 million, they will see their baselines rise to 11.5 million bpd each. Iraq and Kuwait can expect to see their baselines rise by 150,000 bpd each.
Prince Abdulaziz said OPEC+ would adjust its policy if and when Iranian oil returned to the market. That is if the country reached a deal with world powers over its nuclear programme. Nigeria and Algeria could also see their baselines revised, he said.
Some 1.5 million bpd is ready to be delivered to Iran to be able to add to global supply once they reach the deal. This is what we are expecting from the Islamic country also once the Western sanctions lift.
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