OPEC and an alliance of other top oil producers agreed to gradually add back some 2 million barrels per barrel per day of oil production from May to July, making a cautious bet on the economic rebound from the COVID-19 pandemic.
Starting in May an additional 350,000 barrels per day will be added to production, with another 350,000 coming on the market in June. Come July output will be increased by 450,000 barrels per day.
Meanwhile, Saudi Arabia will over the same period restore an additional 1 million barrels per day in cuts that it made on its own.
OPEC members, led by Saudi Arabia, and nonmembers, led by Russia, have been meeting monthly to determine production levels as they face recovery in demand whose pace has been uncertain.
Oil prices were trading higher despite the decision to increase production, suggesting markets see more than adequate demand for the added oil. Crude oil traded 3.6% higher at $61.28 per barrel in trading on the New York Mercantile Exchange while Brent crude rose 3.1% per barrel to $64.66.
Saudi Arabia’s Energy Minister Abdulaziz bin Salman said that although the market is on a “stable footing” and stocks are continuing to draw down, the OPEC+ alliance should maintain a cautious stance until the evidence of a recovery is undeniable.
Despite striking a more optimistic tone, Russian deputy prime minister Alexander Novak acknowledged the lingering uncertainties and advised: “monitoring the market carefully and making sure it is not oversupplied”.
Higher crude oil prices are eventually reflected in the price of gasoline for U.S. motorists since the cost of oil makes up half the price at the pump. Another factor that could soon push prices higher is the demand for gasoline, which is approaching pre-pandemic levels.