Oil-producing countries have considered ramping up their out production in the wake of growing demand for energy commodities. With prices hovering around $75 per barrel for a while now, many countries have wanted to increase their oil revenues. Although an earlier meeting led to the cartel rejecting a proposed half a million barrel per day increase, it seems that these oil producers changed their minds in their most recent monthly meeting.
According to their most recent meeting notes, OPEC countries decided to restore some of the previous production cuts they had made during the start of the COVID-19 pandemic. After their Sunday meeting concluded, OPEC announced that they would be raising production by more than 400,000 barrels per day for each month throughout 2022.
In terms of specific players in the cartel, Russia has been a long-time proponent of increasing oil output. In contrast, Saudi Arabia has played a more conservative role, trying to keep output restrained until the market is ready. Between the two, the United Arab Emirates has been sitting on the sidelines, often rejecting proposals to increase oil output. However, the country ended up voting in favor of raising oil production, an unexpected turnaround from last month’s refusal.
“We appreciate the constructive dialogue we had with his highness and OPEC,” said UAE Energy Minister Al Mazroui in a press call with journalists on Sunday. “I confirm that the UAE is committed to this group and will always work with it and within this group to do our best to achieve the market balance and help everyone. The UAE will remain a committed member in the OPEC alliance.”
OPEC cut production by a record 10 million barrels per day when the pandemic first broke out. Around the same time, prices for oil had fallen to around $20. Since then, OPEC has been gradually increasing its output over the past several months. Compared to last year, the current output is 5.8 million barrels per day lower than its pre-pandemic peak.
It wasn’t the only interesting piece of news to emerge from the meeting. OPEC also warned that strong oil demand, while a good thing for oil-producing countries, could also help accelerate inflation. The group predicts that oil demand will rise by another 3.3 million barrels a day to just under 100 million barrels per day. Most of this rise in demand is associated with a global economic recovery, which could end up causing a hike in inflation.
Most oil analysts remain incredibly optimistic about the commodity. Although prices have hovered between $70 and $75 for the most part, many analysts think oil could skyrocket to as high as $100 per barrel in the coming years. Despite the media reporting the rise of new coronavirus variants, most states are lifting restrictions on economic activity. For the most part, a similar trend is taking place all over the world.
OPEC also expects that gasoline and diesel demand will make a full recovery in 2022 as well. It’s a similar prediction made by the IEA on Tuesday, which predicted that growth for energy commodities will end up surpassing demand sometime in 2022.
