On July 18, an official OPEC+ statement announced that major oil-producing countries had reached a preliminary agreement to gradually increase oil production through December.
This means that OPEC+ will increase oil production by 400,000 barrels per month starting in August until all halted oil production has been restored. The agreement also raises the production cut baseline for Saudi Arabia, the UAE, Iraq, Kuwait, and Russia starting in May 2022.
Under the agreement, OPEC+ agreed to set the UAE's new crude oil production cut baseline at 3.5 million barrels per day and adjusted the benchmark oil production for Saudi Arabia and Russia to 11.5 million barrels per day.
In addition, OPEC+ plans to fully cancel the 5.8 million barrels per day of production cuts by September 2022, provided market conditions allow.
Regarding the UAE's push for this agreement by seeking more favorable terms and broader prospects, different Wall Street analysts generally agree that the current oil market is experiencing undersupply. The agreement removes uncertainties on the supply side, while demand-side risks from the delta variant must be monitored.
Citi’s Global Head of Commodity Research, Ed Morse, told media that the market supply is currently very tight, rendering the additional 400,000 barrels per day insignificant. He noted that despite outbreaks in some parts of the world, demand has significantly increased and oil prices could rise further by the end of summer.
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