The members of the OPEC and its partners from the OPEC+, including the Russian Federation, met on Thursday, 1 April 2021 and jointly decided – from May 2021 – to gradually reduce existing production restrictions and increase the production of oil supplied to the world commodity market. Despite the date of their meeting, this meeting and its conclusions were certainly not a 1st April joke, but a pragmatic business decision, to which traders and investors of the global commodity market reacted.
According to economic correspondents, the development of oil prices on the commodity market on 13 April showed a relatively different reaction of investors, when the price of oil rose and West Texas Intermediate (WTI) light crude oil even traded above US$ 60 per barrel. On 13 April at 6:02 am CET, the price of WTI oil was US$ 60.05 per barrel and the European counterpart of WTI oil, North Sea Brent oil, was trading on the same day at 6:23 am CET at US$ 63.57 per barrel, with a daily appreciation of +0.46%. According to analysts, this price jump is only a short-term phenomenon and is a response to the current situation of demand slightly exceeding supply.
Given the increase in production in May by OPEC and OPEC+, oil prices on the world commodity market can be expected to fall again. Analysts predict that oil prices will fall ahead of the increase in oil production itself as a manifestation of investor sentiment. At the moment the OPEC and OPEC+ alliance is currently reducing oil production of over 7 million barrels a day in an effort to boost oil prices on the global commodity market and reduce oversupply. Saudi Arabia, as the main leader of the OPEC countries, has voluntarily added a further reduction in oil production of 1 million barrels per day. The ongoing coronavirus crisis continues to obscure the outlook for the rest of this year, and analysts expect it to reaffirm Saudi Arabia’s caution regarding the recovery of the world economy.
Prior to this meeting, OPEC Secretary General Mohammed Barkindo emphasized the need to “remain very careful” due to the continuing uncertainty and fragility caused by the coronavirus pandemic. Similarly, Saudi Arabia has previously called on its partners to remain “extremely cautious” regarding production policy and warned the group against significantly higher oil production as it seeks to ensure a full recovery of the oil market. However, Russia was working towards an increase in supply. As part of the negotiations, a compromise was reached in the form of increasing oil production from May 2021 by another 350,000 barrels per day and then another 350,000 barrels per day from June. Production will continue to increase in July, when it will increase by another 450,000 barrels per day, so that from August total oil production will increase by 1.5 million barrels per day compared to the current situation in April 2021.