Oil cartel OPEC and its allies have agreed to add more supplies to the market to ease the upward pressure on oil prices as the global economy is slowly reviving from the impacts of COVID-19.
In today's virtual OPEC+ meet in Vienna, it was decided that output will be increased by 400,000 barrels a day each month, after the UAE and Saudi Arabia reached a compromise regarding production allocations.
The UAE's baseline was raised to 3.5 million barrels a day from the previous limit of 3.2 million. While Saudi and Russia will see their baselines increase to 11.5 million barrels per day each, Iraq and Kuwait will see their baselines rise by 150,000 barrels per day each.
The UAE's energy minister Suhail al-Mazrouei said the Emirates support the agreement reached by the OPEC+.
“The UAE is committed to this group and will always work with it,” the UAE energy minister Suhail Al-Mazrouei told reporters after the meeting, Bloomberg reported.
"We strongly support the agreement reached," the minister was quoted as saying by al-Sharq TV.
“OPEC+ is here to stay. Consensus building is an art and the group will continue to meet every month to closely monitor the market recovery," Bloomberg quoted Saudi Energy Minister Prince Abdulaziz bin Salman as saying during a press conference after the meeting.
Surging oil prices
Oil prices have been increasing steadily for months. In the first week of June, brent crude rose 1.3 percent to $70.25 a barrel, marking its highest close since May 2019. Had the cartel not clinched a new deal to raise production, that would have driven oil prices up. Some analysts predicted prices reaching $90 a barrel.
Dubai's top lender Emirates NBD expects oil prices to trade at an average of $70 per barrel for the rest of the year.
"Our base scenario is for lower price and our expectation for the remaining of the year is for $70 for brent, which I think is consequent with more supply being readily added to the market," Maurice Gravier, Chief Investment Officer, Wealth Management at Emirates NBD said in an interview with Bloomberg.
Japanese megabank MUFG thinks that a vaccine-led, global economic recovery will keep crude in the 70s territory in Q3, with higher OPEC+ production doing little to alleviate a tight summer oil market.
"We do not rule out sporadic spikes above $80 per barrel over the summer should the Delta COVID-19 variant begin to ebb and Iranian nuclear negotiations linger and lead to a delay in the return of production to Q4 2021," Ehsan Khoman, Head of Emerging Markets Research (EMEA) at MUFG said in a research note.
"For 2021 as a whole, we continue to forecast Brent crude averaging $68 per barrel and WTI averaging $65 per barrel," he added.
(Reporting by Seban Scaria ; editing by Anoop Menon)
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