OPEC+ agreed to increase oil supplies after the UAE and Saudis reached a compromise.
OPEC+ ministers agreed on Sunday to increase oil supplies from August to calm prices that have soared to 2.5-year highs as the global economy recovers from the coronavirus pandemic.
OPEC+ slashed production by a record 10 million barrels per day (bpd) last year as demand collapsed and prices collapsed due to the pandemic. Afterwards, it gradually restored some of the supply, with the goal of leaving it down about 5.8 million bpd.
Oil prices fell more than $1 a barrel on Monday after the OPEC+ producer group overcame domestic problems and agreed to increase production. However, COVID-19 infections continued to rise in many countries, raising concerns about a surplus of crude oil.
Brent crude was down $1.08, or 1.5%, to $72.51 a barrel as of 0220 GMT, after falling nearly 3% last week. West Texas Intermediate (WTI) oil was down 1.01 cents, or 1.4 percent, to $70.80 a barrel after falling almost 4% last week.
The group, which includes the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, has agreed on new production shares from May 2022, and oil prices may continue to fluctuate in the coming weeks.
To tackle internal issues, OPEC+ has agreed on new production quotas for many members from May 2022, including UAE, Saudi Arabia, Russia, Kuwait and Iraq.
This agreement reassured market participants that the group is not in an uncontrolled breakup and has no intentions of opening production thresholds anytime soon.
However, while the market confirming this strategy it sees the oil outlook remains bullish and the deal is guiding future higher production capacity, focusing on maintaining a tight physical market while discouraging competitive investment.
We can say that the OPEC+ deal will lower its summer forecast for Brent below $80 a barrel and increase its forecast over the average of $75 a barrel for next year.
