Oil Prices Soar as OPEC+ Keeps Output Cuts Amid Demand Recovery Business

by Victor Adetimilehin

Oil prices rose sharply on Thursday, recovering from the previous day’s losses, as an OPEC+ panel decided to maintain its oil output cuts to support a tight supply situation amid a recovering demand outlook. The OPEC+ group, which includes the Organization of the Petroleum Exporting Countries and allies led by Russia, produces about 40% of the world’s crude oil. The group has been cutting its output by about 7 million barrels per day (bpd) since May 2020 to balance the market and support prices.

On Wednesday, the group’s Joint Ministerial Monitoring Committee (JMMC) met virtually and agreed to keep the current level of cuts until the end of 2023, while Saudi Arabia said it would continue with its voluntary cut of 1 million bpd until then. Russia also said it would keep its voluntary export curb of 300,000 bpd until December. The decision came as oil demand is expected to rebound strongly in the second half of 2023, after a slump in 2020 due to the COVID-19 pandemic. The International Energy Agency (IEA) said in its latest report that global oil demand would grow by 5.7 million bpd in 2023, reaching 96.7 million bpd, close to the pre-pandemic level.

The IEA also said that global oil supply was lagging behind demand, as non-OPEC+ producers, such as the US shale industry, were struggling to ramp up production amid higher costs and lower investment. The agency said that global oil inventories fell by 34.4 million barrels in July, reaching their lowest level since January 2020. The bullish outlook for oil demand and supply boosted oil prices on Thursday, as Brent crude, the international benchmark, rose by $2.47, or 2.9%, to $88.46 a barrel by 0900 GMT. US West Texas Intermediate (WTI) crude also gained $2.38, or 2.9%, to $85.78 a barrel.

Analysts said that oil prices could rise further in the coming months, as OPEC+ has shown its willingness and ability to manage the market and prevent a supply glut. Some also said that oil prices could reach $100 a barrel by next year, as demand recovers faster than supply.

However, some risks and uncertainties remain for the oil market, such as the possible resurgence of COVID-19 cases and variants, the pace of vaccination campaigns, and the geopolitical tensions in some oil-producing regions. OPEC+ said it would continue to monitor the market closely and adjust its policy accordingly. The next OPEC+ meeting is scheduled for November 4, when the group will review its output policy for December and beyond.

[Source] The Print

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