Oil prices steady before Opec+ meeting

The alliance of crude producers is considering plans to bring back 2 million barrels per day to the market by the end of the year

The Opec+ group will meet on Monday to decide on oil production cuts. Reuters

Oil prices remained steady on Monday before an Opec+ meeting and a pending decision over future production increases.

Brent, the marker under which two thirds of the world's crude is traded, fell by about 0.1 per cent to $76.10 a barrel at 9.41am UAE time. West Texas Intermediate, which tracks US crude grades, was 0.04 per cent lower at $75.13 a barrel.

Opec and its allies, led by Saudi Arabia and Russia, failed to reach consensus on Thursday and Friday during a ministerial gathering that followed a joint ministerial monitoring committee meeting.

Some members of the alliance have called for a revision of the group's current baseline for calculating production quotas.

On Sunday, the UAE, Opec’s third-largest producer, affirmed its commitment to the oil exporters' bloc and the Opec+ alliance. However, the country's Ministry of Energy and Infrastructure said it "believes that the market needs an increase in production and supports an increase from August", according to a report by state-run news agency Wam.

Opec+ is considering plans to bring back 2 million barrels per day to the market by the end of the year.

The group came together at the height of the coronavirus-induced demand crunch to introduce record output curbs of about 10 million bpd last year.

Growing energy demand worldwide – as economies relax Covid-19 movement restrictions – has caused prices to rise by about 50 per cent from the start of the year.

The UAE has adhered to Opec+'s production curbs and achieved a 103 per cent compliance rate throughout the latter's two-year term.

The country said yesterday that "the joint ministerial monitoring committee, unfortunately, only put one option forward – to increase production on the condition of an extension to the current agreement – which would prolong the UAE’s unfair reference production baseline until December 2022, from the existing agreement end date of April 2022".

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The UAE, which plans to raise its production capacity to 5 million bpd by 2030, is concerned about an outdated baseline reference that is currently being used to assign its production quotas.

According to secondary Opec sources, the country's output for the month of May stood at 2.64 million bpd.

Crude prices are currently trading higher due to Opec+'s supportive policies and growing demand as business activity resumes amid receding Covid-19 infection rates in major economies.

Monthly oil market reports from the US Energy Information Administration, Opec and the International Energy Agency have all painted a supportive picture for crude oil demand.

The agency now expects global oil demand to return to pre-virus levels by late next year.

Opec left its outlook for global demand growth unchanged for the second consecutive month amid easing movement restrictions.

Oil demand is expected to grow by 6 million bpd, with total consumption expected to hit 96.6 million bpd, Opec said in its monthly oil markets report last month.