OPEC and its allies, OPEC+, agreed to stick to their existing plan for gradual monthly oil-production increases after a brief video conference. Ministers ratified the 400,000 barrel-a-day supply hike scheduled for October after less than an hour of talks, one of the quickest meetings in recent times and a stark contrast to the drawn-out negotiations seen in July this year.
“OPEC have proven once again that they can meet and do things seamlessly,” Christyan Malek, head of oil and gas and JPMorgan Chase & Co., said on Bloomberg TV. “It’s likely that harmony is going to be utilized” to respond flexibly to any further shifts in the market over the coming year, he said.
While conditions may appear favorable for cartel right now, there are uncertainties on the horizon. Even as demand recovers, it has been buffeted by the emergence of new coronavirus variants. The question of whether Iran and the U.S. will do a deal to lift sanctions on the Islamic Republic’s oil exports — currently looking less likely — also hangs over the market.
The Organization of Petroleum Exporting Countries and allies including Russia are in the process of rolling back the unprecedented output cuts implemented at the depths of the Covid-19 crisis last year. About 45% of the idle supply has already been revived, and in July the group laid out a plan for gradually returning the remainder through to September 2022.
With crude prices mostly recovered from their mid-August slump and the supply outlook relatively tight for the rest of the year, the 23-nation coalition had little reason to change the established schedule of gradual monthly supply hikes, despite a request from the White House to revive output faster. “While the effects of the Covid-19 pandemic continue to cast some uncertainty, market fundamentals have strengthened and OECD stocks continue to fall as the recovery accelerates,” OPEC+ said in a statement. The group will meet again on 4 October this year.