OPEC+ agreed to increase the size of its oil-supply hikes by about 50%, in a deal that kept Russia at the heart of the cartel while also heeding pressure from major consumers including the US.
Ministers approved production increases of 648,000 barrels a day of oil for July and August, up from recent monthly hikes of 432,000 barrels a day. Moscow gave the plan its full backing and talks were concluded in just 11 minutes, delegates said, asking not to be named because the information was private.
Oil had fallen before the meeting on reports that Saudi Arabia and other members were prepared to fill the gap in the market created by Western sanctions on Russian oil, or even remove the country from the OPEC+ quota system altogether.
After the agreement, crude reversed its losses in New York and was 0.7% higher at $116.03 a barrel as of 9:35 a.m. local time.
Thursday’s agreement “is a pretty minor tweak” to the existing OPEC+ deal, said Bill Farren-Price, a director at Enverus Intelligence Research. “But it is a nod toward looming tight balances later this year, when the EU sanctions on Russia start having an impact.”
Opening the taps wider is still a turnaround for OPEC and its allies. The group, led by Saudi Arabia, has been doggedly sticking to its plan for gradual monthly supply increases even after the invasion of Ukraine by Russia, a key member of the group, upended global markets and sent energy prices soaring.
Last week, the Saudi foreign minister said there was nothing more it could do to tame oil markets, and even suggested there was no shortfall of crude.
Political pressure from the White House may have brought about the kingdom’s shift.
“The United States welcomes the important decision from OPEC+ today to increase supply,” said White House Press Secretary Karine Jean-Pierre. “We recognise the role of Saudi Arabia as the chair of OPEC+ and its largest producer in achieving this consensus.”
The output increase will be divided proportionally between members in the usual way. Countries that have been unable to raise production, such as Angola, Nigeria and most recently Russia, would still be allocated a higher quota.
That could mean that the actual supply boost is smaller than the official figure, as has often been the case in recent months.
“They could have said a million and the price would still go up,” Ole Hansen, head of commodity strategy at Saxo Bank said on Twitter. Many countries won’t be able to deliver any extra oil, he said.
Only Saudi Arabia and the United Arab Emirates have significant volumes of spare capacity that could be ramped up quickly.
Russia’s production has dropped significantly since the invasion of Ukraine on a combination of western sanctions, shipping difficulties and rejection by some traditional customers. Its output was 1.3 million barrels a day below its OPEC+ target in April, according to the International Energy Agency.