Despite strains within the group, a decision was made and agreed upon to increase crude oil production among Russia and the Organization of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+. The increase, however, will be modest in size. Starting in January, they will increase production by 500,000 barrels per day (bpd).
The Future is Still Unclear
OPEC and OPEC+ had cut production at the beginning of the pandemic by 9.7 million bpd. At that time, before it was known how long this pandemic would be stretching, OPEC had planned to increase production again by 2 million bpd every six months. With the continuing of the rolling lockdowns throughout the world, that, of course, did not happen.
It is still unclear what will happen after January. The pandemic and vaccine rollout make global economic recovery rates extraordinarily unpredictable. For this reason, the decision was also made that OPCE+ members will begin meeting monthly from January through April in an effort to keep up with the rapid global changes. It is possible that after January there will be another similar increase.
The Difference a Vaccine Makes
It took several days for the modest increase to be agreed upon, most likely because of the new COVID vaccine. News of the vaccine’s approval brought the highest oil prices seen since the drop at the beginning of the pandemic.
“Vaccine approval fast-tracking is seen as a positive by the oil market, but as it will take some time for vaccinations to be applied to the wider population, the support to oil demand will take time to be visible,” said Rystad Energy oil analyst Bjornar Tonhaugen. But even so, the bump in prices is seen as a harbinger. “As prices rise, the willingness to restrain supplies wither,” said Bhushan Bahree, an IHS Markit executive director.