OPEC+ Resumes Output with 2022 Tapering Deal

• New supply policy involves cautious, controlled tapering till all cuts are unwound
• Five members get new baselines, indicating art of deal-making still alive in OPEC+
• Higher baselines do not mean higher overall output!
• Setting a longer-duration supply policy and end-goal show evolution of strategy
• As OPEC+ unwinds output curbs, it’s going to be all about market share
• Challenges ahead: Iran’s return, expected US output rebound, quota-busting

The Agreement

• Energy ministers of the OPEC/non-OPEC alliance on July 18 agreed on a collective crude supply boost of 400,000 b/d each month from August and going into next year, until all the remaining production cuts are unwound. If the output hikes proceed as planned, without any tweaks that may be necessitated by changing market conditions, the 5.8 million b/d of supply currently withheld from the market should be back roughly by September 2022.
• The United Arab Emirates secured a 332,000 b/d increase in its baseline effective May 2022, about half of what it had sought in a surprise request that triggered a deadlock within OPEC+ hours ahead of its ministerial meeting on July 1.
• Unexpectedly, OPEC+ also approved an upward revision in the baselines for four other members from May 2022. Saudi Arabia…