OPEC+ agrees to production hike after baseline output compromise
Quantum Commodity Intelligence – The OPEC+ producer group Sunday has agreed to add 2 million barrels of crude oil to the market by year end, after resolving the row over baseline production levels that had gridlocked a deal brokered at the early July meeting, reported OPEC.
OPEC+ has agreed to increase production by 400,000 barrels per day each month starting in August, theoretically until output is fully restored, but the group is expected to continue its regular meetings and match supplies with returning demand.
"We will keep the 400,000 bpd on a monthly basis. We will review in December. We kept our window open for review," Prince Abdulaziz bin Salman, Saudi Arabia's energy minister told reporters after the meeting.
In a statement OPEC said; "In view of current oil market fundamentals and the consensus on its outlook, the Meeting resolved to adjust upward their overall production by 400,000 bpd on a monthly basis starting August 2021, until phasing out the 5.8 million bpd production adjustment, and in December 2021 assess market developments and Participating Countries' performance.
Additionally, OPEC+ extended the Declaration of Cooperation until the 31st of December 2022, from the current April 2022 expiry date.
As part of the deal, a number of producers will have their baseline production levels revised upwards, including the UAE, Saudi Arabia, Russia, Kuwait and Iraq.
The UAE will see its baseline production, from which cuts are being calculated, increase to 3.5 million bpd from May 2022 from 3.168 million, while Saudi and Russia will see their baselines rise to 11.5 million bpd, up from 11 million.
The deadlock had come about after the UAE pushed for an increase in its baseline level in return for supporting the DOC extension.
A week-long holiday starts in the Middle East on July 19, which Quantum previously reported was seen as a cut-off date for an agreement to leave enough time to implement August increases.
"OPEC-plus has done it. With their July 18 agreement, they have hammered out a very reasonable and even obvious compromise. It maintains an orderly return of shut-in oil to the world market," said Daniel Yergin, oil analyst and author of The Prize.
Middle East, benchmark Dubai crude for September delivery was assessed Friday at $72.20/b (1630 Singapore time), down from $73.00/b at last Friday's close, a fall of 1.1% on the week, according to Quantum data.
OPEC will next meet September 1, 2021.
