Saudis, Russia tentatively agree on gradual OPEC oil output hike

Salma El Wardany, Grant Smith, Javier Blas and Dina Khrennikova 7/1/2021

(Bloomberg) --Saudi Arabia and Russia have a tentative deal to gradually increase OPEC+ oil output in the coming months, delegates said.

Negotiations over the details of the supply hike are still underway, the delegates said, asking not to be named because the information is private. The proposal under discussion would add about 2 million barrels a day to the cartel’s output from August to December, they said.

The implementation of the agreement would be conditional on the status of talks between Iran and the U.S., who are seeking to revive their nuclear pact and lift sanctions on the Islamic Republic’s oil exports, delegates said. It would also extend the expiry date for all of the OPEC+ cuts from April to December 2022, a delegate said.

The evolving debate between the Organization of Petroleum Exporting Countries and its allies has big implications for the oil market and the broader economy.

Crude has risen around 50% this year, with the recovery in demand from the pandemic outpacing the revival of OPEC+ supplies after last year’s deep cuts. Oil’s surge, combined with a rally in other commodities, has central banks fretting about inflation again. It also shows how Saudi Arabia and Russia are b ack in the driving seat of the global energy market -- a remarkable come back from negative prices just over a year ago.

Oil extended gains in New York, rising 2.7% to $75.43 a barrel.

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