Oil prices are rising as OPEC and its allies expand production cuts

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The Organization of the Petroleum Exporting Countries (OPEC) and allied producers said on Thursday that they would largely give up production cuts in April. Two countries – Russia and Kazakhstan – have received exemptions to increase their production by a small amount.

The OPEC + Group agreed in January to keep production constant for February and March. At the time, Saudi Arabia surprised markets by pledging to cut production by another 1 million barrels a day, a move that reflected the unrest of fragile demand. Saudi Arabia agreed on Thursday to extend the additional cut until April.

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In recent months, rising prices have made producers more confident that production cuts have put the market on a solid footing in the wake of the pandemic. But the group chooses to play safely on Thursday. The reduction in its supply amounts to almost 8 million barrels per day, including the extra Saudi contribution.

At a press conference, Saudi Energy Minister Abdulaziz Bin Salman said “the jury is still out” on the future of the oil market. “When you have this unpredictability and uncertainty, I think you can make choices. I belong to the school to be conservative and to take things in a more cautious way. I will believe in [the market recovery]”When I see her,” he said.

Last year, OPEC + reduced production by a record 9.7 million barrels per day. Emergency steps, along with reduced production by the US and other producers, have led to a sharp recovery in prices. This recovery has accelerated in recent months, as millions of people around the world have been vaccinated against Covid, slowly reducing restrictions.
Gross futures have now regained all the ground lost in the first months of the pandemic. Brent crude, the global benchmark, rose more than 5 percent to $ 67.55 on Thursday. US oil prices topped $ 64.50, far from the depths of April last year, when oil fell below zero for the first time in history.

The International Energy Agency expects global oil demand to increase by 5.4 million barrels per day in 2021 to 96.4 million barrels per day, recovering about 60% of the volume lost in the pandemic. Demand will increase in the second half of this year as more vaccines are given, the group said last month.

However, there are concerns about the pace of vaccine distribution. Even in countries that have gained early access to doses, including the European Union, more is needed than expected to vaccinate the population. Additional delays could weaken crude oil demand later this year.

– Matt Egan, John Defterios and Chris Liakos contributed to the reporting.

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