A day after OPEC reached a difficult agreement to boost oil production by half a million barrels daily from January, Russian Deputy Prime Minister Alexander Novak told local media that by April, the cumulative increase in output will reach 2 million barrels daily.
“The compromise comes down to the fact that we will gradually increase production to the level stipulated in the agreement. By adding 500,000 bpd to total production each month during the first quarter by April, barring any force majeure, we will reach a production increase level of 2 million bpd,” Novak explained.
OPEC+ yesterday reached a compromise agreement to start adding 500,000 bpd to total production beginning in January as a means of bridging a widening gap between the priorities of different members of the cartel.
Yet the agreement is being touted as a win for all parties, although some OPEC ministers were vocally opposed prior to the meeting to adding in any production out of fear that oil demand would not be able to sustain any added production.
It was Russia who proposed the option of adding half a million bpd to combined production instead of extending the current production cuts of 7.7 million bpd. According to reports, Moscow shared this opinion with one of Saudi Arabia’s staunchest allies, the UAE. The Kingdom itself has favored an extension of the current level of cuts
Indeed, the outlook for oil demand remains uncertain despite the recent slew of potentially good news about Covid-19 vaccines that pushed oil prices closer to $50 a barrel than they have been since the start of the year.
Meanwhile, OPEC is more divided than ever: some members, notably Iraq, are finding it hard to stick to their production quotas, which was the cause of the extra meeting this week.
“A lot of dissatisfaction, a lot of fatigue among a lot of members with having put in these cuts for so long because of Covid,” the managing editor of S&P Global Platts Middle East and OPEC, Herman Wang, told CNBC. “And with these vaccines perhaps around the corner, some of these countries aren’t willing to maybe play ball for much longer.”
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com:
- A Major Oil Rally Could Be On The Horizon
- Oil Majors Are Paying The Price For Investing In Renewables
- Japan And Kuwait Strike Major Oil Storage Deal