Algerian Minister of Energy Mohamed Arkab, current president of OPEC, summed up the group’s sentiment, saying that “despite the progress made to date, we cannot afford to rest on our laurels.”
In recent days, the de facto head of the cartel, Saudi Arabia, has negotiated with other OPEC members and certain non-OPEC countries, including Russia, Kazakhstan and Azerbaijan, to extend current production reductions by 9.7 million bpd for at least a month
Most of the countries participating in the record production cuts were willing to continue the current agreement, but the disrespect from countries like Iraq, Nigeria and Kazakhstan caused dissatisfaction among other OPEC members, some of which have even made larger cuts than those agreed in April.
At the virtual meeting on Saturday, the agreement agreed that countries that were unable to fully comply in May and June will have to compensate for this in July, August and September.
Oil prices actually doubled in May, as global demand started to recover and saw production declines and well closures worldwide, which reduced the glut of monsters.
While the extension of the OPEC + agreement will undoubtedly have an upward effect on the markets, prices are not expected to increase much on Monday, as the new OPEC + have already been widely integrated.
For oil prices to fully recover, global demand will need to recover and crude oil inventories will need to be reduced, which will likely take up to two years. Scott Sheffield of Pioneer said that the rapid rebound in demand to around 94-95mb / d after the “reopening” of so many economies would give way to stagnation, saying that demand would not reach its levels from before the pandemic until 2022 or even 2023.
For the moment, the next upside catalyst for oil could come from Saudi Aramco, which could set the upward trend in oil prices in June, as it is expected to release its OSPs (official selling prices) on Monday. Aramco’s OSPs are often a leading indicator of Iraqi, Iranian and Kuwaiti oil prices, and last month Brent futures rallied after Riyadh raised its crude prices in Asia.
By Tom Kool of Oilprice.com
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