The deal, reached at a hastily convened meeting on Sunday, allows for monthly supply hikes of 400,000 barrels a day
18 July 2021 - 20:00Opec and its allies struck a deal to inject more oil into the recovering global economy, overcoming an internal split that threatened the cartel’s control of the crude market.
Prices in New York initially surged to a six-year high in New York in early July after talks to boost output failed, before plunging back towards $70 a barrel as traders considered the possibility that the alliance could unravel. The cartel will starting raising output in August and continue until all of its 5.8-million barrels a day of halted output has been revived. An agreement on this was only possible because the UAE, and several other countries including Russia and Saudi Arabia, will be given higher baselines against which their production cuts are measured, starting in May 2022.
The deal has several important consequences. As demand recovers, it gives consumers a clearer view of how quickly Opec+ will revive the production it’s still withholding, after making deep cuts last year in the initial stages of the pandemic. “With monthly meetings, the group wants to keep their hand on the oil market steering wheel,” said Giovanni Staunovo, a commodity analyst at UBS Group. The volume being added will keep the market fairly tight “so I would still expect prices to trend higher near term, before slightly declining towards the end of the year.”The accord also resolves longstanding grievances that have caused tensions within Opec+ since late 2020.
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