OPEC and its allies agreed to stick to their existing plan for gradual monthly oil-production increases after a brief video conference.
Ministers ratified the 400,000 barrel-a-day supply hike scheduled for October after less than an hour of talks, one of the quickest meetings in recent memory and a stark contrast to the drawn-out negotiations seen in July.
“OPEC have proven once again that they can meet and do things seamlessly,” Christyan Malek, head of oil and gas and JPMorgan Chase & Co., said on Bloomberg TV. “It’s likely that harmony is going to be utilized” to respond flexibly to any further shifts in the market over the coming year, he said.
While conditions may appear favorable for cartel right now, there are uncertainties on the horizon. Even as demand recovers, it has been buffeted by the emergence of new coronavirus variants. The question of whether Iran and the U.S. will do a deal to lift sanctions on the Islamic Republic’s oil exports — currently looking less likely — also hangs over the market.
West Texas Intermediate pared earlier losses, trading 0.9% lower at $67.87 a barrel at 11:53 a.m. in New York.
The Organization of Petroleum Exporting Countries and allies including Russia are in the process of rolling back the unprecedented output cuts implemented at the depths of the Covid-19 crisis last year. About 45% of the idle supply has already been revived, and in July the group laid out a plan for gradually returning the remainder through to September 2022.
With crude prices mostly recovered from their mid-August slump and the supply outlook relatively tight for the rest of the year, the 23-nation coalition had little reason to change the established schedule of gradual monthly supply hikes, despite a request from the White House to revive output faster.
There had been some doubts about the plan when oil markets wobbled over the summer as the resurgent virus threatened demand. But fuel use proved resilient, with total oil products supplied in the U.S. rising to a record in late August.
“While the effects of the Covid-19 pandemic continue to cast some uncertainty, market fundamentals have strengthened and OECD stocks continue to fall as the recovery accelerates,” OPEC+ said in a statement. The group will meet again on Oct. 4.
Data presented to ministers reveal a fresh challenge for Saudi Arabia and its partners in 2022. Markets were projected to tip back into surplus next year, with an average oversupply of 1.6 million barrels a day. However, the projections assume the group will restore all of the almost 6 million barrels a day of output that remains offline — an unlikely feat as many countries may struggle to reach their full targets.
The amount of crude production that OPEC+ theoretically holds offline is based on questionable figures. Russia has an inflated baseline that’s significantly higher than pre-pandemic output. Some other members have outdated capacity numbers, with countries including Angola and Nigeria already struggling to make the supply increases permitted under the deal.