OPEC+ Clinches Deal to Boost Output

[WHITT]

The UAE's threat to walk gambit worked.

OPEC and its allies struck a deal to inject more oil into the recovering global economy, overcoming an internal split that threatened the cartel's control of the crude market. An unusually public dispute that tested the group's unity was resolved in a classic compromise -- with Saudi Arabia meeting the United Arab Emirates halfway in its demand for a more generous output limit.

Sunday's agreement for monthly supply hikes of 400,000 barrels a day puts the Organization of Petroleum Exporting Countries and its allies back in control of the market after two volatile weeks. The UAE's level was increased to 3.5 million barrels day, below the 3.8 million it was demanding when it blocked an OPEC+ deal earlier this month, but above the previous baseline of 3.17 million. The baselines for Saudi Arabia and Russia both rose by 500,000 barrels a day to 11.5 million.

The truce between the two long-time allies will ease a looming supply squeeze and reduce the risk of an inflationary oil price spike. It also puts an end to a diplomatic spat that unnerved traders, reviving speculation that the UAE could be willing to leave OPEC -- as it threatened to do last year.

https://www.bloomberg.com/news/articles/2021-07-18/opec-clinches-deal-to-boost-output-as-gulf-allies-call-truce

[ProfessorGAC]

1. Confusing Numbers

Says a 400k bbl/day increase.
But, UAE is going up 330k & the article says SA & Russia are increasing by 500,000 barrels.
How does that add up to 400,000?
It's never fully explained in the article why the numbers contradict.

[Spider Jerusalem]

2. The "baseline" numbers are an estimate of maximum production.

So it's basically raising the cap on allowed maximums, not saying that overall production will go up by that amount (since 400K is the target).

[WHITT]

3. It's Increments Of 400k

The 'monthly supply hikes of 400,000 barrels a day', are incremental, not the total.

[ProfessorGAC]

4. Duh!

Got it.
Not sure why I missed that.

[WHITT]

5. No Biggie

It happens with all of us.