The Organisation of Petroleum Exporting Countries (OPEC) and its allies on Sunday agreed to increase global oil production by 400,000 barrels per day.
OPEC and its Russia-led oil-producing allies, OPEC+, agreed to unleash barrels of bottled-up crude over the next two years by committing to restore all of the cuts they made at the start of the coronavirus pandemic.
The oil cartel announced the new development as economies pick up and crude demand recovers across the globe.
In a statement issued at the end of the 19th OPEC and non-OPEC ministerial meeting on Sunday, the oil cartel said the new adjustment will take effect from August until December 2021.
“In view of current oil market fundamentals and the consensus on its outlook, the Meeting resolved to reaffirm the Framework of the Declaration of Cooperation, signed on 10 December 2016 and further endorsed in subsequent meetings, including on 12 April 2020,” OPEC said.
“Extend the decision of the 10th OPEC and non-OPEC Ministerial Meeting (April 2020) until the 31st of December 2022.
The organisation said it would continue to adhere to the mechanism to hold monthly OPEC and non-OPEC ministerial meetings for the entire duration of the declaration of cooperation, in order to assess market conditions and decide on production level adjustments for the following month.
The group said it agreed to new production allocations from May 2022 after Saudi Arabia and others agreed to a United Arab Emirates (UAE) request that had threatened the plan.
It also agreed to “adjust, effective 1st of May 2022, the baseline for the calculations of the production adjustments according to the attached table.”
Robin Mills, chief executive of Dubai-based consulting firm Qamar Energy, told the Wall Street Journal on Sunday that the deal is “good for consumers in the short term.”
However, there are expectations that price pressure would remain as demand builds, he added.