Brent crude oil, the global benchmark for Nigerian type of oil, declined from $77.16 a barrel it reached on Monday, July 5, 2021 to $73.81 a barrel on Friday as OPEC+, OPEC and allies, agreed to up crude oil supplies by 400,000 barrels per day in 2022 following the disagreement between Saudi Arabia and the United Arab Emirates (UAE).
The oil cartel on Wednesday agreed to up UAE baseline from 3.2 million barrels a day to 3.65 million barrels a day from April 2022, below the 3.8 million barrels per day being pushed by UAE but a number that works for both parties, especially given global oil uncertainties in the last two weeks.
UAE had said increasing its baseline for crude oil production, the maximum volume OPEC recognised as being able to produce, will help reduce the size of its production cuts and quotas it must follow as per the group’s agreements.
Most OPEC delegates agreed to up production by 400,000 barrels a day through the end of 2022. This would end the remaining limits that were set in the spring of 2020, as economic recovery and growing demand for oil have brought crude prices up to their highest level since late 2018.
Price moderated as traders started pricing in the expected increase in crude oil supplies come 2022, especially knowing prices are presently overbought with enough fundamentals or technicality to back the resent surge in oil prices.
According to Avtar Sandu, senior commodity trader at Phillips Futures in Singapore, “The market is not taking any chances. Prices are very overbought anyway, so traders might want to take some money off the table before the deal is concrete.”