Oil prices rise as OPEC and its allies expand production cuts

Oil prices rise as OPEC and its allies expand production cuts

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

The OPEC + group agreed in January to keep production stable for February and March. At that time, Saudi Arabia surprised the markets by promising to cut its production by an extra 1 million barrels a day, a move that reflected concerns about fragile demand. Saudi Arabia agreed on Thursday to extend its extra cut to 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 following the fall of the pandemic. But the group prefers to play it safe on Thursday. Its supply cut reaches almost 8 million barrels per day, including Saudi Arabia’s extra contribution.

At a news conference, Saudi energy minister Abdulaziz Bin Salman said that “the jury has not yet decided” on the future of the oil market. “When you have this unpredictability and uncertainty, I think there are choices you can make. I belong to the school to be conservative and take things in a more cautious way. [the market recovery], when I see, “he said.

Last year, OPEC + reduced production by 9.7 million barrels per day. The emergency measures, together with cuts in production by the US and other producers, have led to a strong recovery in prices. This recovery has accelerated in recent months, as millions of people around the world have been vaccinated against Covid, allowing restrictions to be loosened slowly.
The crude futures have now recovered all the ground lost during the first months of the pandemic. Brent crude, a global benchmark, rose more than 5% to $ 67.55 on Thursday. US oil prices were above $ 64.50, a far cry from the depths reached last April, when oil fell below zero for the first time in history.

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

Still, there are concerns about the timing of the vaccine’s distribution. Even in countries that have achieved early access to doses, including the European Union, it is taking longer than expected to vaccinate the population. Further delays could weaken demand for oil later this year.

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

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