Opec+, an alliance of oil producers led by Saudi Arabia and Russia, will begin easing an output restriction from August as demand for crude returns amid easing of movement restrictions in many countries.
The group, which is cutting back 9.7 million barrels per day of production until the end of July, will lower the curbs to 7.7m bpd from August 1, Opec’s joint ministerial monitoring committee said on Wednesday.
Opec’s second-largest producer Iraq and Nigeria are set to cut output further, compensating for their overproduction between May and June when the agreement was underway. This would lead to the group cutting back a total of around 8.1m bpd from the markets in August.
Saudi Arabia's energy minister Prince Abdulaziz bin Salman, who chaired the JMMC meeting, said the overall 8.1m bpd cut in August included compensatory cuts for May only. Countries that have not fulfilled their quotas in July have yet to submit their schedules to the committee.
"Once that happens, there will be an additional increment beyond the 8.1m bpd,” Prince Abdulaziz told reporters following the meeting.
Oil prices rallied following the agreement to ease output curbs. Brent, the international benchmark rose 1.03 per cent to trade at $43.34 per barrel at 9pm UAE time. West Texas Intermediate, the key US gauge, was up 1.07 per cent to trade at $40.72 per barrel.
Opec’s JMMC said that the seasonality of demand for crude will be “more pronounced this year, with a commensurate increase in demand for utilities and travel during the summer".
“For many members, including Saudi Arabia, we envisage that 500,000 bpd of the so called increment that we will be producing in the month of August will go to our domestic markets,” Prince Abdulaziz said.
He expected an increase in petrol and diesel consumption as countries around the world ease movement restrictions.
The minister said that the agreement to implement tapered cuts until April 2022 remains valid. Opec+, which will convene for an extraordinary meeting in December, will decide on the viability of extending these cuts.
Opec’s joint technical committee will next meet on August 17 while the JMMC will convene on August 18.