OPEC+ sticks to plan for gradual oil output hike, price roars higher

Oil and gas tanks are seen at an oil warehouse at a port in Zhuhai, China. (Reuters)

SULAIMANI (ESTA) — OPEC+ said on Monday it would stick to an existing pact for a gradual increase in oil output, sending crude prices to three-year highs and adding to inflationary pressures that consuming nations fear will derail an economic recovery from the pandemic.

The Organization of the Petroleum Exporting Countries (OPEC), Russia and allies, known as OPEC+, have faced calls for additional supplies from big consumers, such as the United States and India, after oil surged more than 50% this year.

OPEC+ “reconfirmed the production adjustment plan” that it previously agreed that would see 400,000 barrels per day (bpd) added in November, the group said in a statement issued after online ministerial talks.

Brent crude roared above $81 a barrel on news that the group would stay with its plan for gradual additional production.

“We will be monitoring the situation, as we know, demand usually falls in the fourth quarter, our plans on increasing (output) are even, we will be watching how the market will be balanced,” Russian Deputy Prime Minister Alexander Novak said.

An OPEC+ source had told Reuters before Monday’s ministerial talks that the group had faced pressure to ramp up production faster, but added: “We are scared of the fourth wave of corona, no one wants to make any big moves.”

The group had agreed in July to boost output by 400,000 bpd a month until at least April 2022 to phase out 5.8 million bpd of existing production cuts, already much reduced from curbs that were in place during the worst of the pandemic.

Demand has bounced back swiftly, while supply has been disrupted by factors ranging from hurricanes that have hammered U.S. production to low levels of investment across the industry during the depths of the pandemic when demand cratered.

A senior aide to U.S. President Joe Biden met Saudi Crown Prince Mohammed bin Salman in Saudi Arabia on a range of issues last week, saying oil was “of concern”. India, another big oil consumer, has pushed for more supply.

“For now, most producing members may be comfortable with an $80 per barrel Brent price, but there is a risk of receiving a backlash or pressure from buyers like the U.S. and China, who are openly calling for lower energy prices,” consultancy Rystad Energy wrote before the ministers met.

Analysts had said they expected uncertainty about the impact on demand from variants of the coronavirus, which threaten fresh economic disruption, to weigh on OPEC+ decision-making.

(Esta Media Network/Reuters)

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