The Organization of Petroleum Exporting Countries, known as OPEC+, agreed on Tuesday to ease production curbs through July, as first accorded last April; this agreement intends to balance the market and gradually recover the demand lost during the pandemic.
Firstly, as we reported previously, on April the organization agreed to return to a 2,1 million barrels a day of supply, during May through July; in anticipation for the demand recovery caused by the vaccination programs around the world.
Secondly, today, after an online-held meeting, member countries of the OPEC+ agreed to stick to that plan, even though the possibility of an increased output of oil from Iran is pending; as it advances on its nuclear deal.
Thirdly, after that decision oil prices have extended their rally and now, they have gained more than 30% this year, surpassing $70 dollars per barrel. This Tuesday the Benchmark Brent crude hit $71 a barrel, its highest since March, according to Reuters.
Moreover, Saudi Energy Minister Prince Abdulaziz bin Salman said he saw a good recovery in demand in the United States and China. As quoted by Reuters, he said. “The vaccine rollout has gathered pace with around 1.8 billion vaccines administered around the world. This can only lead to further rebalancing of the global oil market.”
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OPEC+ confident about Iranian oil
On the other hand, OPEC Secretary General Mohammad Barkindo said he did not expect that the higher Iranian oil supply would cause problems with demand; even if Tehran reaches a nuclear deal with the Western powers, in return for easing oil sanctions.
In addition, he claimed. “We anticipate that the expected return of Iranian production; and also exports to the global market will occur in an orderly and transparent fashion.” According to specialists, Iran could boost production between 1,0 and 1,5 million barrels per day if the sanctions are fully removed.
However, OPEC+ still forecasts a 6 million bpd jump in oil demand in 2021; which would be equivalent to 6% of global consumption; gained as the world recovers from the COVID-19 pandemic.
Finally, OPEC+ had curbed its output by a record 9,7 million bpd during the peaks of the pandemic; when demand collapsed and oil prices reached an historic below zero price. After July, such curb in production will still be at 5,8 million bpd.