A group of some of the world’s most powerful oil producers agreed on Tuesday to continue gradually easing production cuts amid a rebound in oil prices.
OPEC and its oil-producing allies, known as OPEC+, will boost output in July, in accordance with the group’s April decision to return 2.1 million barrels per day to the market between May and July.
Production policy beyond July was not decided on, and the group will meet again on July 1.
International benchmark Brent crude futures traded at $71.17 a barrel on Tuesday, up around 2.7 percent, while West Texas Intermediate crude futures stood at $68.65, for a gain of more than 3 percent and the contract’s highest level in more than two years. Oil prices have climbed more than 30 percent this year.
The Middle East-dominated group, which is responsible for over one-third of global oil production, is seeking to balance an expected upswing in demand with the potential for an increase in Iranian output.
The alliance announced massive crude production cuts in 2020 in an effort to support prices when the coronavirus pandemic coincided with a historic demand shock.
Ahead of the meeting, analysts expected the group to keep output steady.
“I think the event itself is going to be a nonevent. We expect them to basically reconfirm the plan that they laid out on April 1,” Jeffrey Currie, global head of commodities research at Goldman Sachs, told CNBC on Tuesday. “I think the bigger issue underlying this is: How are they going to deal with Iran?”
Iran is in discussions with six world powers to revive its 2015 nuclear deal. The restoration of a deal could lead to more oil on the global market in coming months.
“It’s too early to give specific numbers around Iran,” Currie said. “So I think the best you can hope for in terms of how they are going to deal with Iran is the indication that they are willing to offset any increases in Iran. That could be the positive upside surprise coming out of this meeting.”
OPEC Secretary General Mohammad Barkindo said Monday he did not believe higher Iranian supply would be a cause for concern.
“We anticipate that the expected return of Iranian production and exports to the global market will occur in an orderly and transparent fashion,” Barkindo said in a statement.
“I think everybody is expecting Iran to add a lot of volume. So beyond the July increase, they aren’t likely to come out with any commitment,” Amrita Sen, chief oil analyst at Energy Aspects, said Tuesday.
“We know that as demand rises, we will need more OPEC barrels, but I think Iran is going to be the big question mark for them,” Sen told CNBC.
OPEC+ initially agreed to cut oil production by a record of 9.7 million barrels per day last year as global fuel demand collapsed, before easing cuts to 7.7 million and eventually 7.2 million from January. By July, the group’s production cuts will be on track to stand at 5.8 million.