OPEC+ agreed to increase crude production, but Brent crude prices remain high, noted the US Energy Information Administration (EIA).
First of all, on July 18, OPEC+ and several non-OPEC members (including Russia) agreed to increase monthly crude oil production starting in August 2021.
According to an analysis by the US Congress, multiple factors can affect oil supply and demand, and relatively small imbalances can translate into large price movements.
For now, demand uncertainty in 2021 is at high levels as countries continue pandemic management efforts.
The successful deployment and effectiveness of a Covid-19 vaccine could materially increase economic activity and demand for petroleum products, especially for jet fuel.
Other demand uncertainties include general economic conditions and growth, a major driver of oil demand, and pandemic-related structural/social mobility and job changes (for example, less use of public transportation and increased telecommuting).
Current projections indicate that oil consumption in 2021 may not return to pre-pandemic levels.
On July 19, after the new OPEC+ agreement was made public, the price of Brent crude fell 7% from the previous day to $ 69 per barrel (b).
Since then, the price of Brent crude has been climbing to $ 76 on July 30.
In early July, OPEC + members had suspended their sessions without reaching a new crude oil production deal, and Brent crude futures prices rose to $ 77 on July 5, the highest price since October. of 2018.
According to the EIA, OPEC + negotiations have stalled due to disagreements between Saudi Arabia and the United Arab Emirates (UAE) over the benchmark levels against which members’ production cuts should be measured.
In the deal announced on July 18, OPEC + members agreed to increase production by 400,000 barrels per day (b / d) each month starting in August 2021.
This agreement is in addition to production increases that have already taken place through July 2021, including the reversal of Saudi Arabia’s voluntary production cut of an additional 1 million b/d.