OPEC+ to boost oil production after US 'pressures' Riyadh
The OPEC organisation of oil producing nations, and allied countries in the OPEC+ group, announced on Thursday that they have decided to add some 2 million barrels per barrel per day of oil production from May to July, moving in pace with the recovery of the global economy from the Covid-19 pandemic.
The move followed pressure on Saudi Arabia from the United States, CNN reported. In addition to OPEC cuts of roughly 8 million barrels, which were made due to the coronavirus pandemic, Saudi Arabia had been holding back an additional 1 million barrels per day from global markets.
Saudi Arabia will now eliminate its additional cuts by the end of July.
US Energy Secretary Jennifer Granholm said on Twitter that she had a "positive" call with Saudi Energy Minister Prince Abdulaziz Bin Salman ahead of an OPEC+ meeting.
"We reaffirmed the importance of international cooperation to ensure affordable and reliable sources of energy for consumers," Granholm tweeted.
However, Prince Abdulaziz denied discussing oil prices with Granholm, according to CNN.
"We did not talk about oil, oil markets or oil prices. Period," he said.
OPEC and OPEC+ countries are restoring production that was slashed last year to support prices as demand sagged during the worst of the pandemic recession, which sapped demand for fuel. The group will add back 350,000 barrels per day in May, 350,000 in June, and 400,000 in July.
OPEC members, led by Saudi Arabia, and non-members, led by Russia, have been meeting monthly to determine production levels as they face a recovery in demand, the pace of which has been uncertain.
They face conflicting pressures. Raising production before the demand exists risks sending prices lower. But lower production levels deprive national budgets of money at a difficult time.
Oil prices were trading higher despite the decision to increase production, suggesting markets see more than adequate demand for the added oil. Crude oil traded 3.6% higher at $61.28 per barrel in trading on the New York Mercantile Exchange while Brent crude rose 3.1% per barrel to $64.66.
Abdulaziz bin Salman, who had previously urged careful approach with the recovery still uncertain, said that “the cautiousness is still there” in the group’s approach.
Ahead of the meeting, he had warned that “until the evidence of recovery is undeniable, we should retain this cautious stance ... the waves are still tall and the seas remain rough.”
One reason is the new wave of infections in Europe, which is holding back the economy amid a slow vaccine rollout.
He noted that the reductions would only take effect from May, meaning that the Saudi voluntary cut still had a month to run. He also said that under the agreement, the group could “tweak, or adjust” production as needed in coming months.