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Major oil producers agreed on a production increase on Sunday. United Arab Emirates and Saudi Arabia settled a dispute this month that blocked a deal.
Under the agreement, OPEC Plus, as the group is known, will increase production by 400,000 barrels per day indefinitely every month from August.
The arrangement gives Emirates most of the increase it seeks in its production quota, though not until next April. According to OPEC’s statement, other countries, including Kuwait, Iraq, Saudi Arabia and Russia, will also increase production limits.
Contract ends a cold The cartel’s de facto leader is between Saudi Arabia and the Emirates, which have invested heavily to expand oil production and push the group’s production boundaries.
The monthly increase in production also helps to prevent the contraction in oil supply with the recovery of global economies. oil prices It briefly hit a six-year high on July 6 after the group failed to reach an agreement, underscoring rising concerns. gas prices and inflation generally in the United States and elsewhere.
The pact also appears to make Saudi Arabia, the world’s largest oil producer, the dominant influence over the 23-member group.
But we’ll see how long OPEC Plus will hold together.
The protracted string of failed negotiations this month could herald changes that could create wedges between different members of the group, which includes OPEC as well as Russia and its allies. In the short term, countries with the ability to increase production are likely to press for more freedom to pump oil if the economic impact of the pandemic continues to ease and oil demand rises.
The environment in which OPEC has been operating for a long time is also changing. The organization’s calculation was that it was a smart strategy to seek higher prices by restricting production, since there would always be demand for the enormous resources that its members still have in the land.
Climate change has turned this business strategy upside down. deadly flooding in europe This week is the latest air disaster to prompt lawmakers to demand stricter rules on greenhouse gas emissions. Some countries that rely on fossil fuels as the main source of government revenue may try to cash in on their reserves while they still can.
“This recent OPEC collapse highlights significant changes in oil marketing strategy that are beginning to spill over into the global oil patch,” said Jim Krane of the Rice University Baker Institute.
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