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Home / Business / Oil prices soar as OPEC and its allies extend production cuts

Oil prices soar as OPEC and its allies extend production cuts



The Organization of the Petroleum Exporting Countries (OPEC) and its co-producers said on Thursday that they will significantly reduce production cuts in April. Two countries, Russia and Kazakhstan, received tax exemptions to slightly increase their production.

The OPEC+ team agreed in January to maintain stable production in February and March. At that time, Saudi Arabia promised to cut production by 1 million barrels a day, which surprised the market, and this move reflected the unease about fragile demand. Saudi Arabia agreed on Thursday to extend production cuts to April.

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In recent months, rising prices have made producers more convinced that production cuts have given the market a firm foothold after the pandemic. But the team chose to rest assured on Thursday. Including Saudi Arabia’s additional donations, the country’s daily oil supply is cut by nearly 8 million barrels.

At a press conference, Saudi Energy Minister Abdul Aziz bin Salman said that there is still “hesitation” about the future of the oil market. “When you have this kind of unpredictability and uncertainty, I think you can make a choice. I am a conservative and treat things with a more preventive attitude. I will believe [the market recovery], When I saw it,” he said.

Last year, OPEC+ slashed its output by a record 9.7 million barrels per day. Emergency measures and production cuts by the United States and other producers have led to a strong rebound in prices. In recent months, as thousands of people around the world have been vaccinated against Covid, this recovery has accelerated, which has gradually eased restrictions.
Crude oil futures have now regained all the land lost in the early months of the pandemic. The global benchmark Brent crude oil rose more than 5% on Thursday to $67.55 per barrel. U.S. oil prices are above $64.50, a far cry from the depth when oil prices fell below zero for the first time in their history in April last year.

The International Energy Agency predicts that by 2021, world oil demand will grow at a rate of 5.4 million barrels per day, reaching 96.4 million barrels per day, thus recovering approximately 60% of pandemic losses. The organization said last month that as more vaccines are vaccinated, demand will surge in the second half of this year.

However, people still worry about the speed of vaccine distribution. Even in countries that have received early vaccination (including the European Union), the time for vaccination is longer than expected. Further delays may weaken crude oil demand later this year.

— Matt Egan, John Defterios and Chris Liakos contributed the report.


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