OPEC+ is moving towards adding about 2 million barrels per day (bpd) to the oil market from August to December, an OPEC+ source told Reuters as the group eases back on output curbs amid a recovering global economy and an oil price rally.
The source said monthly increases would amount to less than 0.5 million bpd. Another OPEC+ source said top OPEC producer Saudi Arabia and top non-OPEC producer Russia had a preliminary agreement for a deal on easing output curbs from August.
Oil prices extended their gains on the news, with some traders having expected a bigger output rise in August. Benchmark Brent crude was trading at $76.09 a barrel by 1136 GMT, up almost $1.50 on the day and close to 2-1/2 year highs.
The outlined increase “would keep the market tight this summer, with still rising demand over the coming weeks”, UBS analyst Giovanni Staunovo said, adding that the consensus had been for an addition of 0.5 million bpd a month or slightly more.
Ministers from the Organization of the Petroleum Exporting Countries, Russia and their allies, a group known as OPEC+, began online talks on Thursday, when sources said they would decide policy from August and could also consider extending their overall pact on supply restraint beyond April 2022.
Responding to oil demand destruction caused by the COVID-19 crisis, OPEC+ last year agreed to cut output by almost 10 million bpd from May 2020, phasing out the curbs by the end of April 2022. Cuts now stand at about 5.8 million bpd.
An OPEC+ panel on Tuesday said it expected oil demand to grow by 6 million bpd in 2021 but flagged risks of a glut in 2022, saying there were “significant uncertainties” including an uneven global recovery and rising cases of the Delta variant of the coronavirus.
Saudi Arabia, Russia and other OPEC+ members have been cooperating closely since their big falling out in March 2020 just before the pandemic sent oil prices diving. The price crash drove them back together to forge their supply pact.
Yet the group still faces a challenge over how quickly to unwind the cuts.
Riyadh has usually taken a cautious approach about adding new supplies, reflecting uncertainty about the course of the pandemic. Russia, with a more diversified economy that is less reliant on oil, has generally shown concern that high prices could spur on rival U.S. production, which demands higher prices to be economic.