OPEC+ to Raise Crude Production
July 19, 2021
The big news over the weekend is that OPEC+ agreed to a deal that will ultimately offer more barrels to the market. These additional barrels and concern about the increasing delta variant are causing the market to sell off as some traders reduce risks and take profits.
OPEC+ will raise production 400,000 bpd each month from August to December which will amount to a final output increase of 2 million barrels per day. The UAE is being allowed to increase its benchmark production rate from 3.168 million bpd to 3.5 million bpd. The benchmark rates will be used to start calculating quotas starting in May of next year. Also, in the agreement was the news that from May 2022 forward Saudi Arabia, Russia, Iraq, and Kuwait will get to adjust their benchmark production rates up. Saudi Arabia and Russia by 500,000 bpd, Iraq, and Kuwait by 150,000 bpd. All this is being seen as more production leading to the current bearish sentiment.
There are some that see these additional barrels as minor and just enough to keep up with rising demand. Of course, a factor that could impact that demand is the dealt variant if it causes some economic shutdowns.
WTI and Brent Crude have sold off and are testing key support levels. RBOB and ULSD still have some room for the downside before hitting technical support. At this point, any pullback will be viewed as corrective if the bulls can keep prices above these key price levels. WTI key support is 68.57, Brent 70.99, RBOB 2.1385, and ULSD 2.2286.