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Oil output policy decision in focus as prices rise

The logo of the Organization of the Petroleum Exporting Countries (OPEC) at the headquarters.

Omar Marques | LightRocket | Getty Images

LONDON — OPEC and non-OPEC ministers finished Friday’s meeting without a resolution and they will meet again on Monday on oil output policy, CNBC’s Brian Sullivan reported.

The energy alliance, often referred to as OPEC+, met via videoconference on Friday afternoon to decide on whether to keep output policy unchanged or to ramp up supply further.

OPEC+ except for the United Arab Emirates agreed to an easing of cuts and their extension to the end of next year, according to Reuters citing an OPEC+ source. The UAE said the extension is conditional to revising its baseline production, Reuters reported.

Oil prices moved on the news, rising slightly Thursday before losing momentum Friday as traders digested the implications. International Brent crude futures traded at $76.03 a barrel, up 0.2% for the session, while U.S. West Texas Intermediate futures settled 7 cents lower at $75.16 a barrel Friday.

The OPEC alliance had agreed in principle to increase supply by 400,000 barrels per day from August to December 2021 in order to meet rising demand, Reuters reported, citing unnamed OPEC+ sources.

OPEC kingpin Saudi Arabia and non-OPEC leader Russia had also proposed extending the duration of cuts until the end of 2022, according to Reuters.

However, Reuters reported that the UAE opposed these plans on the grounds that OPEC+ should change the baseline for cuts, effectively raising its production quota.

Rising tensions

Oil prices

Oil prices have rallied more than 45% year-to-date in the first half of the year, supported by the rollout of Covid-19 vaccines, a gradual easing of lockdown measures and massive production cuts from OPEC+.

U.S. investment banks on Wall Street still see plenty of room left to run in the coming months.

The rosy outlook for oil prices comes as all three of the world’s main forecasting agencies — OPEC, the International Energy Agency and the U.S. Energy Information Administration — expect a demand-led recovery to pick up speed in the second half of 2021.

However, the spread of the delta Covid-19 variant worldwide has exacerbated concerns of a setback to oil demand. Renewed lockdown measures and rising costs have already resulted in slower factory growth in China, for instance.

Read More: Oil output policy decision in focus as prices rise

2021-07-02 15:38:34

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