- OPEC+ countries agree to stick to the existing policy of gradual production increases from historic pandemic cuts to supply
- This means in October, member nations and their allies will increase supply by 400,000 barrels per day (bpd) of oil
- In August, the US National Security Advisor Jake Sullivan urged OPEC to lift production limits more quickly to keep crude prices in check
The Organisation of Petroleum Exporting Countries and non-member states (OPEC+) have resolved to stick to the policy of increasing oil supply at a virtual meeting on Wednesday.
At the previous meeting held in July, OPEC+ nations agreed to a monthly increase in overall oil production of 400,000 barrels per day (bpd), starting from August.
This monthly adjustment would slowly phase out the 5.8 million bpd reduction in oil supply, implemented by the group to maintain oil prices after the COVID-19 pandemic curtailed demand.
Given the conclusion at the OPEC+ meeting to maintain this policy, supply will increase by 400,000 bpd in October and, subject to market conditions, production adjustments will be phased out by September 2022.
The decision did not heed to requests from the US, a non-member nation, for OPEC+ to lift production cuts more quickly. In August, National Security Advisor Jake Sullivan said doing so would keep crude oil prices in check and support economic recovery.
“Higher gasoline costs, if left unchecked, risk harming the ongoing global recovery,” Mr Sullivan said. “The price of crude oil has been higher than it was at the end of 2019, before the onset of the pandemic.”
West Texas Intermediate (WTI), a benchmark for the US oil market, is priced around US$15 (A$20.4) per barrel higher than at the start of September 2019.
“While OPEC+ recently agreed to production increases, these increases will not fully offset previous production cuts that OPEC+ imposed during the pandemic until well into 2022. At a critical moment in the global recovery, this is simply not enough,” Mr Sullivan said.
On Wednesday, WTI Crude Oil Futures on the New York Mercantile Exchange settled at US$68.59 (A$93.20) per barrel, up US$0.09 (A$0.12) on the previous close.
The next OPEC+ meeting is scheduled for October 4, 2021.