By Adewale Sanyaolu
The Organisation of Petroleum Exporting Countries(OPEC+) has agreed to gradually increase production. OPEC+ decided to add more than 2 mb/d over the next few months, betting on rising demand.
The deal calls for a 350,000-bpd increase in May, followed by the same amount in June, and then by 450,000 bpd in July.
At the same time, Saudi Arabia will ease its voluntary 1 mb/d cuts by July. OPEC+ surprised markets last time around by maintaining cuts, this time they surprised in the other direction after analysts expected no change.
Oil prices however climbed on Thursday despite the surprise decision by OPEC+ to increase production, a decision that has been seen as promising for demand.
Oil prices rose despite OPEC+’s decision to increase production. In fact, rather than a bearish move, investors interpreted the decision as a vote of confidence in demand. “The [supply] deficit that we’re already in is likely to accelerate,” Jeff Currie, head of commodities research at Goldman Sachs Group Inc., said in a Bloomberg Television interview
Meanwhile, U.S. shale production is set to decline through at least 2022, according to BNEF. By the end of the year, the industry could lose another 485,000 bpd. “It could be a while before U.S. oil companies feel comfortable growing production again,” BNEF analyst Tai Liu said in a note.