The Organization of the Petroleum Exporting Countries (OPEC) and major oil producers affiliated with the organization agreed to extend oil production cuts. Both parties deem the global economic situation is still unstable for more oil production.
OPEC: slow and unstable economic recovery, production cuts prolonged
The coronavirus pandemic led to the greatest crude oil production cut by OPEC+. Noted from CNN, OPEC+ had to slash 9.7 million barrels per day. The decision came as an emergency. The US and other producers also followed to cut production. As the situation gets better and controlled, the expectation of a less restricting policy also arises.
It appears that OPEC is still maintaining the restriction on oil production. Except for Russia and Kazakhstan, the production cuts will continue until April. Despite the rising prices from the past few months, the group decided to play it safe and prolong output for a few more months. Currently, around 8 million barrels per day are cut from the supply. This includes the extra contribution from Saudi.
Oil future predicted
Crude has fully regained its loss inflicted by the pandemic. According to CNN, Brent crude, which stands as the global benchmark, has shown a more than 5% rise to $67.55 on Thursday. Additionally, US oil prices jumped above $64.50 after crashing below zero last April.
Accordingly, oil demand is expected to grow bigger in 2021. The International Energy Agency predicts 5.4 million barrels per day growth per day, which totals to 96.5 million barrels per day in 2021. This alone will contribute to at least 60% of the volume loss from the pandemic. The group expects the recovery in demand to take place in the second half of 2021 as more countries gain access to COVID-19 vaccines.
Read also: The Controversy Over Biden’s Oil ‘Transition’
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