OPEC+ Maintains Plan for Gradual Oil Output Increase as Prices Surge, Reports Reuters

OPEC+ Maintains Oil Output Plan Amid Rising Prices

By Alex Lawler, Ahmad Ghaddar, and Olesya Astakhova

LONDON – OPEC+ announced on Monday that it will continue with its existing strategy for a gradual increase in oil production, which has led to crude prices reaching three-year highs. This development raises concerns about inflationary pressures that could hinder the economic recovery from the pandemic.

The Organization of the Petroleum Exporting Countries, along with Russia and its allies, known collectively as OPEC+, has been under pressure from major consumers such as the United States and India for increased oil supplies following a price surge of over 50% this year.

In a statement issued after online ministerial discussions, OPEC+ reaffirmed its production adjustment plan, which includes an addition of 400,000 barrels per day (bpd) starting in November.

Crude prices soared above $81 a barrel as the market reacted to the group’s decision to maintain its gradual production approach instead of providing more immediate supply.

"We will be monitoring the situation, as we know that demand usually decreases in the fourth quarter," said Russian Deputy Prime Minister Alexander Novak after the meeting, noting that he views the current market as balanced.

Prior to the ministerial discussions, an OPEC+ source indicated that the group faced calls for a quicker production increase but expressed caution, particularly regarding a potential fourth wave of COVID-19, which has made major changes seem risky.

In July, the group agreed to incrementally raise output by 400,000 bpd per month until at least April 2022 to gradually eliminate 5.8 million bpd of existing production cuts. These curbs have already been significantly reduced from the severe restrictions imposed during the peak of the pandemic.

While demand has rebounded quickly, supply has been hampered by various issues, including hurricanes affecting U.S. production and a lack of investment in the industry during the pandemic’s lowest points.

A senior aide to U.S. President Joe Biden met with Saudi Crown Prince Mohammed bin Salman last week to discuss various topics, expressing concerns regarding oil supply. India has also sought additional supplies as a major consumer.

"The outcome of the OPEC+ meeting was expected, but with prices above $80 per barrel, this is a situation that causes discomfort for consumers while making producers both pleased and cautious," noted consultancy Rystad Energy.

Analysts highlighted ongoing uncertainty over demand due to potential coronavirus variants, which may influence OPEC+’s future decisions.