Members of the Organization of the Petroleum Exporting Countries (OPEC) and their OPEC+ allies agreed on Thursday to increase their production by 500,000 barrels per day in January, against nearly 2 million initially planned, following a meeting of the members of the alliance.

"It was decided to increase the oil supply in January 2021, with a total increase in production by the OPEC + countries of 500,000 barrels per day", announced the Kazakh Ministry of Energy, which is among the cartel allies, in a statement.

OPEC confirmed the deal in a statement, noting that the adjustment reduced cuts to 7.2 million barrels per day from 7.7 million today.

This decision seems the result of a compromise between on the one hand the countries which wished to extend the current reductions, and those which wanted to follow the steps of the calendar fixed after tough negotiations in April 2020, which envisaged the lowering of the volume withdrawn market at 5.8 million barrels on January 1.

It comes at the end of an interministerial meeting which began shortly before 3:00 p.m. GMT (4:00 p.m. in Paris) but above all after a week of negotiations, formal and informal, of the twenty-three members of the alliance. Due to the health crisis, these meetings were held by videoconference.

The effort made in recent months, painful for everyone's finances, has played its part in reversing the vertiginous fall in crude prices, the American benchmark having even ventured into negative territory for a moment in the spring, a first in the story.

Since then, a second wave of Covid-19 has dashed hopes of a rapid, "V-shaped" recovery in global growth and the movement of goods and people consuming black gold.

- Price in recovery -

The markets have welcomed this decision rather positively: the two reference prices - Brent from the North Sea and the American WTI - gained more than 1% and quoted respectively 48.83 and 45.74 dollars per barrel around 6:10 p.m. GMT (7:10 p.m. Paris).

"It's not the nightmare scenario that the market feared, but it's not what it really expected a few weeks ago," reacted Paola Rodriguez Masiu, analyst at Rystad.

This increase comes in the wake of a recent rise in prices - around 25% in November alone for WTI and Brent from the North Sea, i.e. the best month since May - driven by the hope of massive vaccination campaigns against Covid-19, prospect of a return to "normal" oil demand, pushing some countries to reassess the need for such a sacrifice.

The thorny subject of compliance with quotas by each member was also addressed by OPEC+ ministers.

"The meeting agreed to extend the clearing period to March 2021" to allow laggards to come into compliance, according to the OPEC+ statement.

The cartel must also consider production levels in the ranks of three of its quota-exempt members, some of which are set to grow.

This is the case of Libya, whose production almost reduced to zero in 2020 as a result of an internal conflict, has soared since October. It has now exceeded one million barrels per day, according to the Libyan National Oil Company (NOC).

In the medium term, a more flexible American policy vis-à-vis Iran - also not affected by quotas - after the election of Democratic candidate Joe Biden, could bring hundreds of thousands of barrels back to the market daily. that it will have difficulty absorbing as it stands.

bp/anb/pcm

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