By Andrea Hargraves 
Members of the Organization of the Petroleum Exporting Countries and their allies (the so-called OPEC + group) met this afternoon but decided to postpone any decision until Friday, as all the terms of the production agreement have not yet been agreed upon. This is because the UAE does not seem to agree with everything that is on the table.
As far as we know, everything indicates that OPEC+ has decided to move forward with the gradual opening of its taps. After putting another 2.1 million barrels per day on the market in the first seven months of the year, some sources told Reuters and Bloomberg that the decision would now be to increase its exports by another 2 million barrels per day between August and December.
Crude oil prices reacted sharply to these indicators, trading at their highest levels in October 2018, expecting that more black gold will continue to flow gradually – and thus be easily absorbed at a time when demand continues to increase in the context of economic recovery.
West Texas Intermediate (WTI) “benchmark” for the US, for August delivery continues to add 2.74% to $75.48 a barrel. The July contract for Brent North Sea crude, a London-traded crude and a reference for European imports, rose 1.88% to $76.02. When rumors started circulating about production volumes, the price rose by more than 3% in New York and more than 2% in London.
The fact that the increase in production set for August could be 400,000 barrels per day, when it was expected to reach half a million barrels per day, helped drive prices higher. According to the agreement that will be on the table, each month – from August to the end of the year – will come 400,000 barrels per day, a total of 2 million barrels.
Thus, there is plenty of room for the oil market to absorb greater production – and the additional 2 million barrels per day not until December will meet projected consumption needs. According to OPEC, the global supply of crude in the fourth quarter will be 2.2 million barrels per day below demand.
OPEC+’s precaution not to flood the market is due to the re-emergence of new cases of COVID-19 in many regions, particularly in Asia and Europe. There is also the Iranian factor that must be taken into account, as the re-establishment of the nuclear agreement will lead to the lifting of sanctions against Tehran, and the entry of more black gold into the market.
The general expectation of increased consumption this year and the successive decline in crude stocks in countries such as the United States and China, with refineries operating at full speed, has supported prices, and a possible decision by OPEC + eases fears of inflationary pressures – because if the major producing countries do not leak more, Prices may go up.
It is worth noting that in May last year, in response to the sharp drop in demand caused by the restrictions caused by the pandemic, OPEC + agreed to cut supplies by 9.7 million barrels per day. The idea is to step up this effort to cut production in phases until the end of April 2022. Currently, the cut is 5.8 million barrels per day – counting crude oil that has since returned to the market at the end of 2020 and in the first seven months of 2021.
The OPEC + committee said on Tuesday, citing Reuters, that it estimates demand growth of six million barrels per day this year. But he sees the risks of oversupply in 2022 due to “significant uncertainties”, that is, the unbalanced global recovery and the possibility that the delta version of the Corona virus will continue to increase the number of infections.
For this reason, a source from the British organization said yesterday that the supply cut agreement could go beyond April 2022 – so that by that date almost six million barrels held by OPEC + members in the market do not enter the market. Underground. But according to OPEC + sources to Reuters, the UAE was not satisfied with the possibility of the entry into force of this agreement until the end of next year, after it obstructed making a decision today.