Oil prices rise as OPEC and its allies expand production cuts

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The Organization of the Petroleum Exporting Countries (OPEC) and allied producers said on Thursday that they would largely renew production cuts during the month of April. Exemptions were granted to two countries (Russia and Kazakhstan) to increase their production by a small amount.

The OPEC + group agreed in January to keep production stable during the months of February and March. At the time, Saudi Arabia surprised markets by pledging to reduce its production by an additional one million barrels a day, a measure that reflected unease over fragile demand. Saudi Arabia agreed on Thursday to extend its additional reduction until April.

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In recent months, rising prices have given producers more confidence that production cuts have put the market on a solid footing after the pandemic fell. But the group decides to play it safe on Thursday. Its supply cut amounts to almost 8 million barrels per day, including the extra Saudi contribution.

At a press conference, Saudi Energy Minister Abdulaziz Bin Salman said the “jury is still out” of the future of the oil market. “When you have this unpredictability and uncertainty, I think there are options you could take. I belong in the school of being conservative and taking things in a more precautionary way. I believe in [the market recovery], when you see it, ”he said.

Last year, OPEC + reduced production by a record 9.7 million barrels per day. Emergency steps, along with production cuts by the U.S. and other producers, caused a sharp rise in prices. This recovery has accelerated in recent months, as millions of people around the world have been vaccinated against Covid, slowly easing restrictions.
Crude futures have regained all the ground lost during the first months of the pandemic. Brent crude, the world benchmark, rose more than 5% to $ 67.55 on Thursday. U.S. oil prices topped $ 64.50, far from the depths reached last April when oil crashed below zero for the first time in history.

The International Energy Agency expects global oil demand to grow 5.4 million barrels per day by 2021 to reach 96.4 million barrels per day, recovering about 60% of the volume lost by the pandemic. Demand will increase in the second half of this year as more vaccines are administered, the group said last month.

However, there are concerns about the pace of vaccine distribution. Even in countries that have gained early access to doses, including the European Union, it takes longer than expected to vaccinate the population. Additional delays could weaken crude demand later this year.

– Matt Egan, John Defterios and Chris Liakos contributed to the communication.

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