OPEC and its allies reached a consensus on Thursday on easing crude oil output cuts by 350,000 bpd for May and June, and by 450,000 bpd as of July.
The 23 members of coalition, known as OPEC+, made an agreement during the 15th OPEC and non-OPEC Ministerial Meeting held via video conference on Thursday to raise crude oil output by 350,000 bpd in May and June, and by 450,000 in July.
Therefore, crude oil output cut by OPEC+ member countries will decrease to 6.550 million bpd in May, 6.200 million bpd in June, and ultimately to 5.750 million bpd in July.
Saudi Arabia will also gradually phase out its 1 million bpd voluntary production cut from May, ending it in July. So, the country will increase its oil supply to the oil market by 250,000 bpd in May, 350,000 bpd in June and 400,000 bpd in July.
According to the agreement, those members which failed to comply with the oil output cuts are allowed to compensate fully for their overproduction until September 30, 2021.
Iran, Venezuela and Libya are still exempt from any output cuts.
Moreover, the next meetings of the Joint Ministerial Monitoring Committee (JMMC) and OPEC and non-OPEC Ministers are scheduled to be held on April 28.
OPEC and allied producers made a record cut of 9.7 million bpd from May to July 2020 as global lockdown measures slashed fuel demand. Then, the group eased cuts to 7.7 million bpd from August and to 7.2 million bpd as of January, 2021.
During the meeting in January, OPEC+ reached a compromise on crude oil output cuts of 7.125 million bpd for February which decreased to 7.05 million bpd and 6.9 million bpd in March and April respectively.
Zangeneh: Oil Demand Has not Reached 2019 Levels
Oil demand is expected to grow by 5.6 million bpd as business activities would recover, however, it has yet to reach 2019 levels, said Iran’s Minister of Petroleum, Bijan Zangeneh, on the sidelines of the 15th OPEC and non-OPEC Ministerial Meeting held on Thursday via video conference.
The 15th OPEC and non-OPEC Ministerial Meeting was held today and we reviewed the situation, he said. “Generally, OPEC and non-OPEC members stayed committed to the pact although some members failed to comply fully which caused other members’ complaint. So, it was decided to allow them to compensate for their non-compliance until September.
Global economy is expected to grow by 5 percent. Oil demand is also forecasted to increase by 5.6 million bpd as business activities would rebound, he said, adding “global oil demand decreased by 9.6 million bpd in 2020 compared to 2019 and it has yet to reach 2019 levels.”
Given the successful vaccination as well as the allocation of 1900 billion dollars by the U.S. administration as economic stimulus, OPEC+ agreed to raise oil output by 350,000 in May and June, and by over 400,000 July in order to avoid market volatility and support prices. The group also decided to hold monthly meeting to examine the condition in order to cut oil production, if needed, to avoid instability in the market.
Venezuela, Libya and Iran are still exempt from any cuts as they produce less than their traditional capacity and their historic right due to the U.S. pressure, he said.