A group of some of the world’s most powerful oil producers agreed on Tuesday to continue to gradually ease production cuts amid rebounding oil prices.
OPEC and its oil-producing allies, known as OPEC +, will increase production in July, in line with the group’s decision in April to put 2.1 million barrels a day back on the market between May and July.
The production policy beyond July has not been finalized, and the group will meet again on July 1.
International benchmark Brent crude futures traded at $ 71.17 per barrel on Tuesday, up about 2.7%, while West Texas Intermediate crude futures were at 68 , 65 dollars, for a gain of more than 3% and the highest level of the contract in more than two years. Oil prices have climbed more than 30% this year.
The Middle East-dominated group, which is responsible for more than a third of global oil production, is seeking to balance an expected recovery in demand with the potential for an increase in Iranian production.
The alliance announced massive crude production cuts in 2020 in a bid to support prices when the coronavirus pandemic coincided with a historic demand shock.
Prior to the meeting, analysts expected the group to maintain stable production.
“I think the event itself is going to be a non-event. We expect them to essentially reconfirm the plan they presented on April 1, ”Jeffrey Currie, global head of commodities research at Goldman Sachs, told CNBC on Tuesday. “I think the biggest underlying problem is, how are they going to deal with Iran?
Iran is in talks with six world powers to revive its 2015 nuclear deal. Restoring a deal could lead to more oil on the world market in the coming months.
“It is too early to give precise figures around Iran,” said Currie. “So I think the best you can hope for in terms of how they’re going to deal with Iran is an indication that they’re ready to make up for any increases in Iran. This could be the positive surprise that emerges from this meeting. “
OPEC Secretary General Mohammad Barkindo said on Monday that he did not believe the increased Iranian supply would be a cause for concern.
“We expect that the expected return of Iranian production and exports to the world market will occur in an orderly and transparent manner,” Barkindo said in a statement.
“I think everyone expects Iran to add a lot of volume. So beyond the July hike, they’re unlikely to commit, ”said Amrita Sen, chief oil analyst at Energy Aspects on Tuesday.
“We know that as demand increases we will need more barrels of OPEC, but I think Iran will be the big question mark for them,” Sen told CNBC.
OPEC + initially agreed to cut oil production to a record 9.7 million barrels per day last year as global fuel demand collapsed, before easing cuts to 7.7 million and finally to 7.2 million from January. By July, the group’s production cuts will be on track to reach 5.8 million.