The recent agreement reached by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, also known as OPEC+, has caused a lot of chatter in the energy industry. But what exactly does this agreement mean for the oil market and consumers?
First, let`s start with some background information. OPEC is a group of 13 oil-producing countries that control around 44% of the world`s oil supply. OPEC+ includes these 13 countries plus 10 non-OPEC countries, such as Russia and Mexico. The purpose of OPEC is to coordinate and regulate oil production and prices in order to maintain stability in the global oil market.
Now, on to the agreement. In April 2020, OPEC+ reached an agreement to reduce oil production by 9.7 million barrels per day (bpd) in response to the COVID-19 pandemic, which severely decreased demand for oil. This agreement was later extended through the end of July 2021.
Recently, OPEC+ has reached another agreement to gradually increase oil production by 400,000 bpd each month from August 2021 until the end of 2022. This decision comes as global demand for oil continues to recover from the pandemic and as OPEC+ countries aim to maintain stability in the oil market.
So, what does this mean for consumers? Initially, the reduction in oil production led to higher oil prices, as supply became limited. As production gradually increases, it`s possible that consumers could see lower oil prices at the pump. However, this is not a guarantee, as other factors such as geopolitical tensions and natural disasters can also impact oil prices.
Furthermore, the gradual increase in production is likely to have a positive impact on the global economy, as energy is a major driver of economic growth. As OPEC+ countries increase production, they will also be increasing their revenues, which could stimulate economic activity.
Overall, the OPEC+ agreement to increase oil production is a positive move for the global oil market and economy. While it may not necessarily lead to lower prices at the pump, it does provide stability and support for the industry as it continues to navigate the impacts of the pandemic.