OPEC+ Maintains Plan to Increase Production by 400,000 Barrels per Day in October

"Accelerating Economic Recovery... Crude Oil Inventories Also Decreasing"
Uncertainty Still Exists... "Risks Such as Delta Variant and Iran Sanctions"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] The Organization of the Petroleum Exporting Countries (OPEC) and the coalition of major non-OPEC oil-producing countries, known as 'OPEC Plus (OPEC+),' have decided to maintain the production cut easing policy agreed upon at their previous meeting.

According to Bloomberg News on the 1st (local time), OPEC+ held a meeting of oil ministers and agreed to continue the plan to increase production by 400,000 barrels per day next month as well.

In a statement released after the meeting, OPEC+ assessed that "amid ongoing uncertainties due to the COVID-19 pandemic, market potential has strengthened and the economic recovery trend has become clear."

They further explained the reason for maintaining the production increase by stating, "Crude oil inventories in the Organization for Economic Cooperation and Development (OECD) countries are also steadily decreasing."

As a result, oil-producing countries that increased production by 400,000 barrels per day this month will continue the same scale of increase next month.

Christian Malek of JP Morgan commented, "OPEC has once again proven that it can get the job done," and evaluated that "the active efforts of these countries to respond to future volatility in the oil market will shine."

On July 18, OPEC+ agreed to increase production by 400,000 barrels per day each month starting in August by reducing the production cut scale agreed upon last year.

At that time, the total production cut scale was about 5.8 million barrels.

OPEC+ also raised its forecast for global oil demand growth next year from the previous 3.28 million barrels per day to 4.2 million barrels per day.

Foreign media interpreted this as OPEC+ leaving open the possibility of increasing the production increase scale in the future.

The United States has been urging oil-producing countries to increase production as Brent crude prices exceeded $70 per barrel. However, OPEC+ has been cautious about expanding production increases, citing concerns that oil demand could shrink again amid the ongoing spread of COVID-19.

Nevertheless, foreign media analyzed that uncertainties in the oil market still exist.

Bloomberg reported, "Risks include demand recovery and the possibility of new variant virus emergence," adding, "Additionally, the U.S. decision on whether to ease economic sanctions on Iran is also a variable."

Moreover, the possibility of oil oversupply next year was raised. According to experts' analysis, oil supply is expected to increase significantly from next year, resulting in an average daily oversupply of 1.6 million barrels.

However, Bloomberg pointed out that such forecasts assume that all oil-producing countries fully meet their production targets set by each country, and actual oil production volumes may vary.

Meanwhile, oil ministers reached an agreement within one hour at the meeting. Bloomberg reported that this was one of the shortest meetings in the history of OPEC+ meetings.

OPEC+ decided to hold the next regular meeting on the 4th of next month.

This content was produced with the assistance of AI translation services.