OPEC and its allies, including Russia, announced on Thursday that they would gradually increase oil production over the next three months.
By agreeing to modest increases in production, Saudi Arabia appears to have given in to pressure from Russia and other manufacturers to increase production. They want to capitalize on what they see as a likely growing global thirst for oil as economies grow slowly after a pandemic.
The group known as OPEC Plus has withheld eight million barrels from the market every day.
On that occasion, the Saudis decided to “follow the consensus of the members,” said Helima Croft, commodities strategist at RBC Capital Markets, an investment bank.
A call from the new US Secretary of Energy Jennifer Granholm on Wednesday to Prince Abdulaziz bin Salman, the Saudi oil minister, could also have had an impact, although the Saudi official denied that the oil markets had been discussed.
“We reaffirmed the importance of international cooperation to provide consumers with affordable and reliable sources of energy,” Ms. Granholm wrote on Twitter.
Under the agreement, OPEC Plus will increase production by 350,000 barrels per day in both May and June and by 441,000 barrels per day in July. Over the same period, Saudi Arabia will gradually roll out further cuts of one million barrels a day that it has made voluntarily.
Prince Abdulaziz said during a post-meeting press conference that OPEC Plus wanted to test the increase in production but would still be able to change plans if demand did not materialize.
“We can freeze; we can gain weight; we can lose weight, ”he said.
For the time being, the oil market has accepted the prospect of increases that would be less than 1 percent of global consumption per month. Larry Goldstein, an oil analyst with the Energy Policy Research Foundation, said the approach to easing the cuts was “very modest and conservative” and would tend to prop up prices in the coming months.
Ms. Croft also said OPEC’s willingness to increase production is seen as a vote of confidence in the recovery of the global economy.
Brent crude, the international benchmark, rose 2.6 percent to $ 64.26 a barrel on Thursday, while West Texas Intermediate crude rose 3 percent to $ 60.94 a barrel.
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March 31, 2021, 6:27 p.m. ET
Prince Abdulaziz was the main vocalist for reluctance to increase production and warned of the risk of flooding a still weak market. Some analysts also say the Saudis are aiming for higher price levels.
In remarks at the beginning of the meeting, the prince appeared to be advocating maintaining current production restrictions, which keep an estimated eight million barrels of oil per day, or about 9 percent of global consumption, out of the market.
“The reality remains that the global picture is nowhere near uniform and the recovery is nowhere near complete,” said the prince, who chairs the group’s meeting known as OPEC Plus.
The reintroduction of a national lockdown by France announced on Wednesday underscores the ongoing doubts about the recovery from the pandemic and the rising number of cases in the United States.
However, other manufacturers, including Russia and the United Arab Emirates, have pushed for production to increase.
At the beginning of the meeting, Russian Deputy Prime Minister Alexander Novak, Co-Chairman of OPEC Plus, said the market has “improved significantly” since it met last month. He estimated that demand now exceeded supply by about two million barrels a day, a deficit that would lead to a rapid depletion of inventories and potentially higher prices.
Prince Abdulaziz emphasized that he had a good relationship with Mr Novak – a big difference from a year ago when the two countries clashed in a market-breaking price war.
“We talk to each other more often than to our own families,” said the prince.
