Crude prices fell nearly 1% on Thursday with the market bracing for a surge in supplies after reports that an output deal between the Organization of the Petroleum Exporting Countries (OPEC) and its allies has been reached.
Brent crude futures were down 59 cents, or 0.8%, to $74.17 a barrel. The US crude benchmark West Texas Intermediate dropped 62 cents, or 0.9%, and stood at $72.51 a barrel.
Thursday’s price decline followed another significant drop the previous day, with both benchmarks losing more than 2% after reports came out that OPEC+ reached a deal on an oil production increase.
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The prospect of increasing oil supplies to the tight market was due to be settled earlier this month, but a dispute broke out between OPEC+ members, Saudi Arabia and the United Arab Emirates. The UAE was stalling the deal, unwilling to extend the previously reached supply cut agreement beyond April 2022 unless its production quota was raised.
The compromise was reportedly reached on Wednesday after OPEC+ agreed to raise the UAE’s baseline, or the maximum production volume, to 3.65 million barrels a day starting in April.
The baseline directly affects the actual amount of production cuts and output quotas. OPEC+ members cut the same percentage from their baseline during the pandemic, when oil was in oversupply. Having a higher baseline amid growing demand as the world is recovering from the Covid-19 crisis would allow the UAE to pump more.
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The output increase agreement backed by most OPEC+ countries laid out a plan for the group to raise production up to 400,000 barrels a day until December 2022. However, the reports of the deal have not been officially confirmed.
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