After OPEC and its allies decided that the recovery in demand was still fragile despite the recent oil price rally, they agreed to extend most oil production cuts until April, offering Russia and Kazakhstan small exemptions.
Saudi Arabia, the leader of OPEC, said it will extend the 1 million barrels of voluntary oil production cut per day and decide when to stop it gradually in the coming months.
The news pushed oil prices back towards their highest levels in more than a year with Brent trading up 5% above $67 a barrel as the market had expected OPEC+ to release more barrels.
OPEC+ had cut output by a record 9.7 million bpd last year as demand collapsed due to the pandemic. As of March, it is still withholding about 7 million bpd, or 7% of world demand. The voluntary Saudi cut brings the total to about 8 million bpd.
Under Thursday’s agreement, Russia was allowed to increase production by 130,000 barrels in April and Kazakhstan by another 20,000 barrels in order to meet its domestic needs.
Saudi Arabia will decide to lift the the ongoing 1 million barrel of voluntary supply cut gradually when it is convenient for them in the next few months.
Russia insists on increasing production to prevent further price hikes and supports US shale oil production, which is not part of OPEC +.
However, in February, Moscow was unable to increase production due to harsh winter conditions, despite being authorized by OPEC +. Moscow says the extra product is needed to recover the demand in the country.
Analysts say Washington played a much less active role than in the Trump era in trying to influence OPEC’s policies. The US is more focused on helping Americans through its economic stimulus package.
Major oil consuming countries such as India are expressing their concern over the recent oil price hike. A Saudi minister responded Thursday by advising India to use oil it bought cheaply during last year’s price drop.
