OPEC+ Ended Successfully Oil Prices Plummeted

Petroleum ministers of the OPEC+ member states of the Alliance of Oil-producing Countries met on the 18th and agreed to increase production from August. The goal is to restore oil production to the level before the outbreak by September 2022. The oil ministers of Saudi Arabia and the UAE emphasized that the OPEC+ structure will be maintained.

According to the new agreement, OPEC+ will increase production by 400,000 barrels per day from August. If market conditions permit, it is hoped that the oil production will be restored to the level before the outbreak by September next year. In December of this year, the organization reassessed the market conditions.

OPEC+ is composed of the Organization of Petroleum Exporting Countries (OPEC) headed by Saudi Arabia and the camp of non-OPEC oil-producing countries headed by Russia.

Last year, the epidemic caused a sharp drop in global energy demand. OPEC+ agreed to cut crude oil production by nearly 10 million barrels per day, the largest reduction in history. Since then, the overall reduction has been reduced to approximately 5.8 million barrels per day.

OPEC+ agreed to extend the production reduction agreement, which was originally scheduled to expire at the end of April next year, to the end of next year to reserve more room for adjustments to observe the impact of the new crown variant virus on the global economic recovery.

In addition, OPEC+ will begin to adopt a new oil production quota from May next year to resolve the differences between Saudi Arabia and the UAE and avoid threats to the production increase plan.

In fact, both Saudi Arabia and the UAE support the immediate reduction of the scale of production cuts, but the UAE rejects Saudi Arabia’s position to extend the production cut agreement until the end of next year, but does not increase its oil production quota.

OPEC+ agreed to increase daily production quotas for the UAE, Saudi Arabia, Russia, Kuwait, and Ikra starting in May next year, adding a total of 1.63 million barrels. This is a technical operation, because the remaining capacity of oil-producing countries is not high.

Among them, the quota between Saudi Arabia and Russia will increase from the current 11 million barrels to 11.5 million barrels. The UAE has increased from about 3.168 million barrels to 3.5 million barrels. Iraq and Kuwait each increased by 150,000 barrels.

UAE Energy Minister Suhail al-Mazroui said through the Egyptian television al-Sharq that he strongly supports the OPEC+ agreement.

Due to expectations that OPEC+ will increase production, oil prices plummeted last week. New York’s recent month crude oil futures prices plunged more than 4% last week to US$71.45 per barrel, the largest weekly decline since March 19. London Brent’s recent oil futures fell nearly 3% to $73.3, the biggest weekly decline since May 2.