Crude prices have hit multi-month highs after the Organization of the Petroleum Exporting Countries (OPEC) and allied oil producers, together known as OPEC+, agreed not to raise supply for April.
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The rally comes after members of OPEC+ decided to prolong existing output curbs for another month at their meeting on Thursday. The decision came as a surprise for the market which expected the cuts to be slightly eased as oil prices have been rising over the past two months. Moreover, the largest oil producer, Saudi Arabia, surprisingly announced that it will keep its voluntary supply cuts in April, withholding 1 million barrels per day from the market in addition to OPEC+ efforts.
The oil alliance made two exemptions for non-OPEC Russia and Kazakhstan, which were allowed to increase production by 130,000 barrels per day and 20,000 barrels per day respectively.
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Additional production allowed by OPEC+ was Russia’s share in 500,000 barrels per day which OPEC+ had initially planned to add to the market in April, Deputy Prime Minister Alexander Novak said. According to Novak, the adjustment was critically important as Russia needs to meet domestic seasonal demand.
OPEC+ reached a historic oil production cut agreement last year to boost the energy market as the coronavirus pandemic crippled demand. From April 2020 to the end of January 2021, OPEC and non-OPEC countries have withheld 2.3 billion barrels of oil, helping energy prices rebound.
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