The Organization of Petroleum Exporting Countries (OPEC) and the United Arab Emirates (UAE) have agreed to adjust their oil production quotas. The Wall Street Journal (WSJ) reported on the 14th (local time) that the UAE reached an agreement with Saudi Arabia that will allow it to produce 3.65 million barrels per day from next April. The source noted, however, that this is a tentative agreement that needs to be approved at the OPEC+ meeting later this month.
OPEC and non-OPEC producers such as Russia, collectively known as OPEC+, came close to a deal earlier this month to increase production by reducing production cuts in order to contain rising oil prices and meet growing demand for oil. A successful outcome was not achieved.
When the global economy ground to a halt due to the COVID-19 pandemic last year and international oil prices collapsed, OPEC+ decided to cut production by 9.7 million barrels per day, or about 10% of global oil demand at the time. Vaccinations and a decrease in new cases, however, led to a sharp increase in global oil demand as the economy recovered rapidly, primarily in developed nations.
As of earlier this month, most OPEC+ countries agreed to a proposal to increase production by 400,000 barrels per day and withdraw all production cuts in the second half of next year, but the United Arab Emirates rejected the deal, demanding an increase in their quota.
Prices fell immediately after the deal was announced, but after an agreement was reached with Russia and other countries, it became clear that the production increase would indeed occur.
Brent crude, the international oil price benchmark, traded at $76.50 per barrel, while West Texas Intermediate (WTI), the U.S. oil price benchmark, traded at $75.10.