OPEC and its allies reached an agreement to introduce more oil into the recovering global economy, overcoming internal divisions that threatened control of the crude cartel market.
The extraordinary public dispute that the Group’s Union tested was resolved in a classic solution – to demand a more generous exit limit that Saudi Arabia met halfway through the United Arab Emirates.
The agreement reached at the Sunday meeting, which was hastily called for ahead of the long Islamic holiday, allows for an increase of 400,000 barrels a day. OPEC + is back in control of the market after two turbulent weeks when traders looked into the possibility of clarifying the Alliance.
That risk has been avoided – at least for now. The ministers of Riyadh and Abu Dhabi made a great display of their continued friendship and commitment to the Alliance, aside from the acrimony that led to the fall of the OPEC + talks earlier this month.
“Consensus-building is the art,” Saudi Energy Minister Abdulaziz bin Salman told reporters after a meeting. The agreement shows strong ties between the members and shows “OPEC + is here to stay”.
Oil prices fell early on Monday, although analysts said the deal maintains a tight supply. Brent was down 0.8% to $ 73.02 at 7 a.m. in London.
“The agreement reached over the weekend is likely to be more vulnerable in the short term as investors dissolve positions on opportunities for greater supply,” said Daniel Hynes of Australia and New Zealand Banking Group Ltd. -off should be of short duration.
The poster will start increasing production next month and will continue to revive all the remaining 5.8 million barrels a day. An agreement on this was possible, with the Basque Country and several other countries, including Russia and Saudi Arabia, being given a greater basis for measuring production reductions starting in May 2022.
The level of the BAC was between 3.5 million barrels per day, below the 3.8 million required at the beginning of the month when the OPEC + agreement was blocked, but above the previous base level of 3.17 million. The main bases in Saudi Arabia and Russia rose 500,000 barrels a day to 11.5 million.
Tighten the supply
The truce between the two longtime allies will alleviate the tightening of Looming supply and reduce the risk of oil price inflation spike. It also ends with the Diplomatic rumor that upset traders, sparking speculation that the Basque Country might be ready to leave OPEC – as a threat it would make last year.
“The renewal of votes is very public,” said Helima Croft, RBC Capital Markets ’main commodity strategy. “Time will tell if it will be enough to completely silence the talks on engagement issues.”
The agreement has several important consequences. It gives consumers a clearer view of the pace of production that OPEC + still holds back, after deep cuts in the early stages of the Pandemic last year.
There is nothing in the stone. OPEC + will continue to conduct monthly interviews including a market review in December. If necessary, the schedule could be adjusted, said Prince Abdulaziz of Saudi Arabia. The next meeting is in September. 1.
However, the basic adjustments will not change the pace of monthly production of 400,000 barrels per day when they take effect next year, they said.
“With monthly meetings, the group wants to keep its hands on the wheel of the oil market,” said Giovanni Staunovo, a raw materials analyst at UBS Group AG. The added volume will keep the market relatively tight “so that prices tend to rise higher until the near term, before falling slightly towards the end of the year”.
The agreement also addresses long-standing grievances within OPEC + since the end of 2020. The Basque Country has long argued that the way its quota is calculated is unfair because it does not reflect the expansion of the country’s industry.
The problem lasted for months before the conflict finally erupted. Ministers in each country used media interviews to make their case, triggering memories of the 2020 Saudi price war.
Having reached a successful deal on the stock market, the two countries emphasize the strength and friendship of their relationship.
“The Basque Country is committed to this group and will always work,” Energy Minister Suhail Al-Mazrouei told reporters after the meeting. He thanked Saudi Arabia and Russia for pushing for a constructive dialogue that has made the deal possible.