Oil prices continued to climb on Thursday as media reports said OPEC+ was considering increasing production by 2 million barrels per day from August to December-but after the United Arab Emirates blocked a plan, the deal fell into chaos, eased the cut and extended it Until the end of 2022.
The global benchmark Brent crude oil closed at US$75.84 per barrel, up US$1.22 or 1.6%, while US West Texas Intermediate (WTI) crude oil rose US$1.76 or 2.4% to close at US$75.23 per barrel.
During the session, Brent crude oil and WTI crude oil both reached their highest levels since October 2018.
According to media reports, OPEC+ ministers held a meeting via video conference on Thursday to consider increasing monthly production to less than 500,000 barrels per day.
Rystad Energy’s oil market analyst Louise Dickson wrote on Thursday: “If OPEC+ does maintain a conservative stance and increase production in a cautious manner — and up to 500,000 barrels per day is certainly cautious — prices will be supported because Demand will easily absorb it.” Notes.
As demand continues to recover after being plundered by the coronavirus pandemic last year, the Organization of Petroleum Exporting Countries and its allies, an organization known as OPEC+, discussed relaxing the tap to allow more oil to enter the market.
According to Reuters, OPEC+ ministers agreed to postpone the meeting until Friday after the United Arab Emirates expressed reservations about extending production cuts to the current shutdown period in April 2022 until the end of next year.
With the reopening of the economy and people on the road during the tourist season, demand for crude oil is expected to surge in the coming months.
According to data from Rystad Energy, by the end of September, global demand may increase by more than 3 million barrels per day.
“Rystad’s supply and demand balance shows that in August 2021, OPEC+ is calling for an additional 1.6 million barrels of oil a day to maintain market balance,” Dixon said.
She added that Thursday’s OPEC+ meeting is the latest test of whether OPEC+ hopes to continue to push prices up after the demand curve, or whether $75 per barrel is sufficient. However, once the dust settles, any announcement of more than 500,000 barrels per day may shift the scale of oil prices to a bearish side.
OPEC+ agreed to cut production by 9.7 million barrels per day in May 2020. Earlier, when the coronavirus outbreak brought the global economy to an abrupt halt, oil market prices plummeted below zero. The current production cut is about 5.8 million barrels per day.
The alliance led by Saudi Arabia and Russia helps tighten supply and raise prices.
Russia is ahead of countries that agree to produce more at lower prices because Russia’s break-even price-the price at which a country needs to sell a barrel to fund its national budget and balance its accounts-is much lower than Saudi Arabia.
Riyadh continues to promote its cautious relaxation of supply to maintain its preference for higher oil prices.
Gregory Goss, head of the Department of International Affairs at Texas A&M University, told Al Jazeera: “Given that Saudi Arabia is cautious about production levels, I guess production will gradually increase for the rest of this year.” “Of course the market thinks OPEC+ will not Free up large supplies.”
“OPEC+ doesn’t want to go too far, release too much supply too early, and have to look back and shut down production during the’shoulder’ season (which peaks in October) when demand is usually low,” Dixon said of Al Jazeera.
In the pre-pandemic world, the season of declining demand will be a major concern for producers.
However, even if demand rebounds, the emergence of Delta variants is expected to keep the COVID-19 recovery uneven. Many countries, especially those in the Asia-Pacific region, have not yet lifted travel restrictions.
Although the demand for gasoline has recovered well and may reach pre-pandemic levels in 2021, the demand for jet fuel is still under tremendous pressure. International travel policies are still inconsistent. Some analysts said that the aviation industry may not fully recover until the end of 2022 or even 2023.
“The biggest downside risk is still the recovery from the pandemic, which in many places does not look as smooth as everyone hoped,” Gauss said.