Global oil prices have clime dot a two and half year high as demand rise with the reopening of economies from the Covid-19 pandemic closures which has prompted the OPEC+ ministers to agree to increase oil supply from August so that prices come down.

The crucial agreement between the OPEC countries and allies like Russia, which together makes up the OPEC+ group allows oil producers to produce oil under new production allocations from May 2022 following an agreement between Saudi Arabia and others to a request from the United Arab Emirates (UAE) that had threatened the plan.

“We are happy with the deal,” UAE’s Energy Minister Suhail bin Mohammed al-Mazroui told a news conference. How the compromise was achieved was not commented on by Saudi energy minister, Prince Abdulaziz bin Salman.

A pandemic induced slump in oil demand and consequent slump in prices last year prompted the OPEC+ group to cut production by a record 10 million barrels per day (bpd). Since then the group has gradually increased some supply and currently the level of production curb us at about 5.8 million bpd.

OPEC said in a statement that the group will increase supply by a further 2 million bpd or 0.4 million bpd a month starting from August until December 2021.

Previously the OPEC+ had agreed to extend their overall cut on oil production till the end of 2022 compared to an earlier agreement of continuing cuts to April 2022. This decision was taken keeping in mind for some alterations in the agreement in the case of stalling of the global economy because of the emergence of new variants of the coronavirus.

While the UAE had not agreed to the proposal of Saudi Arabia to extend the pact to December 2022 without getting a higher production quota, both Riyadh and the UAE had been supportive of an immediate output boost.

The latest OPEC+ agreement allows new output quotas for several members from May 2022, including the UAE, Saudi Arabia, Russia, Kuwait and Iraq in order to overcome the disagreement.

According to experts, 1.63 million bpd to supply from May next year will be added because of the overall adjustment.

The UAE will see its baseline production, from which cuts are being calculated, increase to 3.5 million bpd from May 2022 from today’s 3.168 million. On the other hand, Saudi and Russia will be allowed a rise in their baselines to 11.5 million bpd each from the current 11 million. Iraq and Kuwait will see their baselines rise by 150,000 bpd each.

Prince Abdulaziz said Nigeria and Algeria could also see their baselines revised

(Adapted from Reuters.com)