Crude Oil Trades Above $76 as OPEC+ Extends Meeting

By Adedapo Adesanya

Crude oil prices continued to climb on Thursday on reports suggesting that oil producers are considering an output hike from August through December at a meeting that was later delayed.

The Organisation of the Petroleum Exporting Countries and its allies (OPEC+) led by Saudi Arabia and Russia had reportedly reached a preliminary agreement, which would see output rise by 0.4 million barrels per day a month from August to December 2021 to meet rising global demand.

However, the deal was thrown into disarray after the United Arab Emirates (UAE) blocked a plan for an easing of cuts and their extension to the end of 2022.

The UAE, which has ambitious oil output growth targets, objected to the proposal during the meeting, asking OPEC+ to change the baseline for cuts – a level of initial output from which reductions are calculated.

The chairs of the alliance had proposed extending the duration of cuts until the end of 2022 to avoid a new glut next year.

OPEC+ ministers agreed to delay their meeting to Friday after the Gulf state expressed reservations about extending supply cuts past the current cut-off year.

But the market did not react negatively to this development as the price of the Brent crude rose by 28 cents or 0.37 per cent to settle at $76.12 per barrel, while the West Texas Intermediate (WTI) crude gained 25 cents or 0.31 per cent to settle at $75.48 per barrel.

Demand for crude is expected to surge in upcoming months as economies reopen and people hit the road during the popular travel season. Oil demand is projected to grow by 6 million barrels per day in 2021 but there are also risks of a glut in 2022.

OPEC+ agreed to cut output by 9.7 million barrels per day in May 2020 after the oil market crashed when the coronavirus outbreak brought the global economy to a screeching halt.

Cuts now stand at around 5.8 million barrels per day as the 23-nation alliance helped tighten supply and lift prices.

The US and Iran have been discussing the possibility of a new nuclear accord. If that happens, Iran could return at least 1 million barrels a day to the market.

However, the timing is uncertain and the oil would have to be absorbed into OPEC’s production total if a deal is struck.