Opec+ agrees to stick with output policy

The Opec+ group has agreed to stick with its plan to gradually increase crude output in June and July, with the return of Iranian supply to the market yet to be an issue for the alliance of oil producing countries.

As agreed back in April, the group's collective output ceiling rose by 350,000 b/d in May and will go up by another 350,000 b/d this month and by 441,000 b/d in July. These increases coincide with Saudi Arabia's plan to gradually unwind its additional 1mn b/d output cut over the same period.

There were no discussions at today's Opec+ ministerial meeting about how or if the group will amend output quotas after July, one delegate said. The issue of how additional Iranian supply will be accommodated should US sanctions against Tehran be lifted was not discussed either, Saudi energy minister Prince Abdulaziz bin Salman said today.

Ongoing talks in Vienna over Washington's return to the 2015 Iran nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA), have raised the prospect of US sanctions on Iran being removed, which could trigger a gradual recovery in Iranian crude output to pre-sanctions levels of around 3.8mn b/d from 2.4mn b/d now, according to Argus estimates. But the speed of any recovery in Iranian production will depend on how quickly a deal can be reached.

A reduction in OECD stocks back to around 2015-19 levels and a limited rise in US shale output have counterbalanced downward pressure from both speculation over Iran and weak Asian oil demand. And the rollout of Covid-19 vaccines has improved oil demand in some regions and put the global economy on the right track to recovery, Prince Abdulaziz, Russia's deputy prime minister Alexander Novak and Opec president Diamantino Azevedo said before today's ministerial meeting.

"There are still clouds on the horizon. Therefore we should continue to consult and closely monitor market fundamentals and be proactive to ensure market stability," Prince Abdulaziz said.

The next Opec+ meeting is scheduled for 1 July.

By Rowena Edwards, Nader Itayim and Ruxandra Iordache