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After a long debate, the OPEC + group has finally reached an agreement on oil production for the next year. Or at least for January.
OPEC +, as a group, will add 500,000 barrels per day in January to its oil production quotas, which currently require a 7.7 million barrels per day production cut. The total production cut in January will now be just 7.2 million barrels per day.
Future allocated quotas may rise or fall, and to determine those oil production levels beyond January, OPEC + ministers will hold additional meetings, one every month.
The deal was touted as a victory for all parties, although behind closed doors all ministers are unlikely to feel this way, as some ministers had expressly opposed before the meeting to add any production out of fear that the demand for oil would not. be able to support any additional production.
In addition to the agreement to add 500,000 bpd of production, OPEC + members who are late in maintaining their production quotas will have to make the difference between now and March, a delegate said.
Other things we know:
- Russia’s share of 500,000 bpd of additional January production is 125,000 bpd.
- Countries can use their share of the 500,000 barrels a day increase by increasing production outright or, for laggards, they can “use” their share of the additional allowance to offset any additional compensatory cuts they need to make.
The fact that the deal is only for January could mean that there have been some heavy concessions that needed to be made to reach a consensus. But the January-only deal is being sold as flexibility that will allow the group to react to swings in demand.
The January deal is expected to have a major effect on oil price volatility in the months ahead. With new OPEC announcements every month, the market hangs on every word and oil prices will respond in the same way, regardless of their actual effect on oil prices.
In a presser at the end of the meeting, OPEC President Prince Abdulaziz bin Salman bin Abdulaziz al-Saud berated the media for their “fanciful” star wars they have perpetuated in recent weeks, referring to reports that the UAE and Saudi Arabia were talking about the way forward.
By Julianne Geiger for Oil “
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