The alliance of OPEC and other major oil producers agreed to increase their collective production by more than 2 million barrels per day in the next few months, betting on the need for recovery as they and the rest of the world assess the economic consequences of this pandemic trajectory .
Participants said that the Organization of Petroleum Exporting Countries and other major producers headed by Russia agreed to increase production by 350,000 barrels per day in May, and to the same level in June. They agreed to then increase production by 450,000 barrels per day in July. At the same time, Saudi Arabia agreed to begin to relax its unilateral one-day cut of 1 million barrels earlier this year. Participants said that it plans to completely cut these cuts by the end of July.
The agreement reached between the two countries on Thursday, collectively called OPEC+, is a compromise between OPEC’s de facto leaders Saudi Arabia and Russia. Saudi Arabia has tried to maintain production cuts and is skeptical of the rapid recovery in oil demand during the pandemic. At the same time, Russia stated that the world already needs more oil to feed the recovering economies in many regions.
This decision is another sharp turn in OPEC’s tortuous oil strategy in the past year, highlighting the difficulty for forecasters in the group and other regions to call for the world to start a sustained recovery from the pandemic.
Participants said that before the meeting between the two groups, Saudi Arabia initially supported the plan to maintain output unchanged. One of them said that the decision to increase production “was completely turned around.”