The Organisation of Petroleum Exporting Countries and its allies seem set to ease back on their production cuts, after ministers, on Tuesday, endorsed previously agreed plans to boost crude oil output from May.
The group, known as OPEC+, intends to pump some two million barrels per day of extra crude oil by July with the most volume coming from Saudi Arabia.
The alliance is betting that improvements in the global economy will outweigh the surge of COVID-19 cases in India, Brazil, and Japan, S&P Global Platts reported on Tuesday.
The report said rosier demand forecasts and robust vaccination programmes in the US, UK, and other countries are enough to give OPEC+ members confidence that a production increase would not drive down prices.
“In the market, we see some optimism and positive dynamics in the indicators of population mobility and the recovery in demand from the largest consumer countries,” Russian Deputy Prime Minister Alexander Novak was quoted by Reuters as saying in his opening remarks to a key OPEC+ monitoring committee that met before a teleconference with all ministers.
“At the same time, we must closely monitor the situation and the spread of the coronavirus that is taking place, especially in some countries of the Asian region,” he added.
Prior to the meeting, Kuwaiti Oil Minister, Mohammed al-Fares, said the oil market “was witnessing a tangible improvement in the rates of demand with the distribution of vaccines and the continuation of stimulus policies by major global economies,” according to state news agency Kuna.
Significant drawdowns in global oil inventories in the last several months have also helped, although the alliance noted in its post-meeting communique that commercial OECD stocks increased by 14.4 million barrels in March and stood 77.4 million barrels above the targeted 2015-2019 average.
OPEC+ ministers will reconvene on June 1 to review their decision.