Oil prices have climbed to a two-year high, going past the $70 per barrel threshold on the heels of OPEC (Organisation of the Petroleum Exporting Countries) and its allies agreeing to increase output in a staggered manner, and against a forecasted recovery in demand in the United States and China, the two largest oil-consuming nations.
OPEC, along with Saudi Arabia and Russia, on Tuesday, reached an agreement to gradually unwind steep cuts originally initiated at the onset of the COVID-19 pandemic. According to reports, they plan to steadily increase supply through July by about 450,000 barrels a day.
In April, OPEC and its allies had agreed to boost output by more than 2 million BPD by the end of July. A technical committee of the OPEC+ group has predicted oil demand to rise by 6 million bpd in the second half of the year. Currently, cumulative demand per day is 4 million BPD.
Crude oil prices have fluctuated significantly for the last 18 months or so. At one point, they had even entered negative territory but since the start of 2021 – when Brent Crude was trading at roughly $52 per barrel – they have consistently risen amid economic recoveries made across the world along with supply curbs introduced by oil-producing nations.
Globally, the gradual unwinding of these supply curbs is not expected to have much impact on oil prices. OPEC also expects that the ongoing talks between the US and Iran towards the removal of sanctions on the latter are unlikely to destabilise crude oil rates.