The Organization of Petroleum Exporting Countries and its allies (OPEC+) stated after their meeting today that the group will stick to its existing pact for a gradual increase in oil output. The market has taken this news positively as crude prices hit multi-year highs.
The OPEC+ has faced calls for additional supplies from big consumers, such as the United States and India, after oil prices have surged over 50% this year. This is because the oil price rally has in turn caused an increase in gas prices, which have spiked 300% and have come to trade close to an equivalent of $200 per barrel due to supply shortages and low production of other fuels.
The OPEC+, after its online ministerial talks, “reconfirmed the production adjustment plan” that it previously agreed to. The group had agreed in July to boost output by 400,000 bpd a month until at least April 2022 to phase out 5.8 million bpd of existing production cuts, already much reduced from curbs that were in place during the worst of the pandemic.
The effect of the OPEC+ meeting on Oil prices
After the news broke, Brent crude quickly roared above $81 a barrel. The global benchmark is currently up 3.05%, currently trading at $81.77 a barrel while the U.S benchmark, the West Texas Intermediate (WTI) is up 2.65%, currently trading at $77.88 a barrel as of the time of this writing. Both pairs are trading at multi-year highs.
Russian Deputy Prime Minister Alexander Novak stated, “We will be monitoring the situation, as we know, demand usually falls in the fourth quarter, our plans on increasing (output) are even, we will be watching how the market will be balanced.”
The price of oil is expected to continue its steady rise as the demand for oil is on the rise and supply hasn’t been consistent over the past few weeks. The supply disruption is a result of a number of factors which include the bullish outlook from top banking giants like Goldman Sachs and Trafigura Group, vaccination efforts and easing of lockdown measures, top African oil exporters Nigeria and Angola struggling to boost output to their quotas set by the OPEC+ and hurricanes Ida and Nicholas, which swept through the U.S Gulf of Mexico in August and September, damaging platforms, pipelines and processing hubs and ultimately shutting down most offshore production for weeks.