Crude Markets Sustain Afternoon Gain

The OPEC+ output increase announced this afternoon (Vienna time) is divided up proportionally between members. Countries unable to raise production – Nigeria, Angola, Russia – will still be allocated a higher quota, which will likely result in a smaller supply boost.

• The real production boost will be insignificant as most OPEC members except for Saudi Arabia and the United Arab Emirates are already pumping at capacity. Crude markets have bounced higher as a result. They were trading lower this morning on news that Saudi and the UAE were going to step in and cover Russia’s output shortfall being cause by a swathe of international sanctions but that failed to materialize.
• Russia was already producing below its OPEC+ target of 10.44 million bpd in April with output running at about 9.3 million bpd – the gap is expected to fall further.
• Saudi Arabia is producing 10.5 million bpd and has rarely tested sustained production levels above 11 million bpd.
• Brent AUG 22 up 0.6% at 116.94$/bbl.
• WTI JUL 22 up 0.8% at 116.13$/bbl.