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OPEC+ sticks with gradual production increases

The OPEC+ group has decided to continue its current strategy of unwinding its production cuts on a gradual basis, despite calls from some quarters to increase production more rapidly.

The group – which combines the OPEC cartel’s members with other oil producers, most notably Russia – will now raise its total production quota by a further 430,000 barrels per day in May. OPEC+ made record production cuts in the wake of the COVID-19 pandemic in 2020, but demand for fuels and industrial products like Castrol metalworking fluids has since recovered, leading to higher oil prices, a situation that has been exacerbated by the recent outbreak of war in Ukraine.

Nevertheless, there are also indications that the demand for oil may weaken again, with the Chinese government having recently put much of Shanghai, its commercial hub, into lockdown to contain the spread of COVID-19 in the country. The OPEC+ group is also concerned that a protracted conflict in Ukraine may impact the global economy, according to an internal report examined by Reuters:

“Consumer and business sentiment is expected to decline not only in Europe, but also in the rest of the world, when only accounting for the inflationary impact the conflict has already caused.”

To help ensure sufficient oil supplies and stabilise the markets, the US government is reportedly considering the release of some 180 million barrels of oil from its Strategic Petroleum Reserve (SPR). The 31 members of the International Energy Agency also recently met to discuss a collective release from their strategic oil reserves.

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