Opec+ agrees on gradual oil quota increase: Update 2

Adds detail throughout

Opec+ crude production could rise by over 2mn b/d by the end of July after the group agreed to an incremental increase in output quotas in May-July and Saudi Arabia said it would unwind its extra 1mn b/d cut over the same period.

The agreement, struck at today's ministerial meeting, will see the group's collective output ceiling rise by 350,000 b/d in May, another 350,000 b/d in June and 441,000 b/d in July. Saudi Arabia will unwind its additional, voluntary 1mn b/d cut by 250,000 b/d in May, 350,000 b/d in June and 400,000 b/d in July.

Riyadh has chosen to unwind "gradually, mindful of how the market may react", Saudi oil minister Prince Abdulaziz bin Salman said. He stressed that there will be a possibility for the group to reverse course if necessary at future meetings, a view reiterated by Russian deputy prime minister Alexander Novak.

Russia and Kazakhstan — the only Opec+ members granted quota increases since January — will see their ceilings increase by a respective 39,000 b/d and 6,000 b/d in both May and June, and by 38,000 b/d and 6,000 b/d in July. The remaining deal participants, including Saudi Arabia, will see their production ceilings rise on a pro rata basis in May-July (see table). Libya, Venezuela and Iran will remain exempt from any output restraint during the three-month period.

The group agreed to extend the deadline for compensatory cuts until the end of September. Previously, countries that have produced above their quotas had until the end of July to fully compensate through additional cuts. The extension followed a "request by several countries that have not yet completed their compensation", according to a statement from the Opec secretariat. Kazakhstan was among those asking for more time to make up for past overproduction.

Today's decision to gradually increase production surprised the market, given the caution urged by the group in the run-up to the meeting. Many delegates had expected a rollover of April quotas. Ahead of the meeting, the Saudi oil minister warned that the oil market's recovery is far from complete and urged the Opec+ group to maintain its "cautious" stance "until the evidence of a recovery is undeniable".

Opec+ oil ministers will next meet to review output policy on 28 April.

By Rowena Edwards, Nader Itayim, Ruxandra Iordache and Anastasia Krasinskaya