The OPEC+ meeting wrapped up Tuesday with producers backing their plan to gradually boost output gradually, while the return of Iranian crude to the market appeared further away. Oil prices rose.
OPEC and allies like Russia, collectively known as OPEC+, will lift production by 350,000 barrels per day in June and by 441,000 bpd in July. Another OPEC+ meeting is due next month.
Saudi Arabia’s oil minister said that Iranian oil is relevant but “the jury is still out,” and the group didn’t discuss the return of Iranian crude to the markets amid talks between Iran and Western powers to revive the nuclear deal.
The Joint Comprehensive Plan of Action (JCPOA) put limits on Iran’s nuclear program in return for relief on economic sanctions, such as oil sales. But the Trump administration withdrew from the deal, blocking Iranian oil exports.
Analysts estimate lifting sanctions on Iran with a revived nuclear deal could add 500,000 bpd to 1.5 million bpd of crude and condensate to the market, putting downward pressure on oil prices.
But Iranian officials reported doubts Monday that an agreement can be reached in the current round of talks. OPEC also estimates global oil inventories will shrink significantly in the second half of the year as the global economic rebound picks up.
Oil prices rose Tuesday, with U.S. crude up 2.3% to $67.83 a barrel and Brent crude up 1.5% to $70.34.
“Sticking to increases planned at the April meeting is what the market needs,” said Wood Mackenzie analyst Ann-Louise Hittle. “Demand growth is outpacing supply gains even with the agreed month-by-month OPEC+ production increases taken into account.”
Prior OPEC meetings have surprised industry watchers in recent months. In March, OPEC+ shocked markets when it maintained quotas despite Saudi Arabia’s earlier reduction of 1 million bpd. And in April, instead of maintaining quotas in May as expected, OPEC+ backed a plan to start raising them.
OPEC Meeting Follows Jolt To Big Oil
The OPEC meeting came amid signs of a climate-change reckoning in the energy industry.
The International Energy Agency issued a report in May that said the only way for the world to reach net-zero emissions by 2050 is for investors not to support any new oil, natural gas or coal projects.
OPEC+ refuted the report, saying it had the ability to create “potential instability in oil markets if followed by some investors,” according to Reuters.
Climate-change activists are pushing Big Oil shareholders. On Wednesday, activist investor Engine No. 1 won at least two seats at Exxon Mobil‘s (XOM) shareholder meeting. Chevron (CVX) shareholders went against management to back a proposal to reduce emissions from the Dow Jones oil giant’s customers.
But the demand for fossil fuels is expected to grow in the coming years with the U.S. Energy Information Administration expecting demand for liquid fuels to average 97.7 million bpd in 2021 and 101.4 million bpd in 2022.
“Tough to turn off the switch and shift to non-oil sources of transport demand quickly. For now, oil supply is needed,” Wood Mackenzie analyst Ann-Louise Hittle tweeted Thursday.
Exxon stock rose 2.7% on the stock market today as oil prices rallied. Chevron added 2.2%, and Shell rallied 1.9%.
Follow Gillian Rich on Twitter for energy news and more.
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