Published on Tuesday, July 13, 2021

Global | OPEC+ once again at loggerheads

With inflation on the rise globally and an increase in Brent prices of around 50% year to date, there are many voices in favour of increasing the supply of oil. OPEC+ has a solution, but after the lack of consensus during the recent meetings, discussions have been put off with no date set for the next.

Key points

  • Key points:
  • The objective: a gradual and coordinated increase in the supply of oil for a "few months". This is where things broke down, the Emirates asked that this only be until the end of the year, with other members asking for it to be until August 2022, (but then backing down and requesting April 2022).
  • For some, this disagreement implies stability in current production levels, which could force prices upwards within a market that is quite stressed at a global level, and also during the hurricane season, as was observed in markets moments after the suspension of the meeting.
  • But on the other side, the disagreement could trigger the breakdown of the common strategy of the OPEC+ and give free rein to the main producers to increase production. This would contain the price and, as was observed to the following day after the suspension of the meetings, could even force it down.
  • For the world economy, the main risk is a lack of understanding that could increase oil prices to such an extent that they become a handbrake to economic recovery.
  • But for those who produce it, there is also the non negligible threat of an end to the agreements, increased production and reliving April 2020 when oil prices were negative.

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