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Oil Prices Surge as OPEC Weighs Rising Demand in Rich Countries

Oil prices rose above $75 a barrel as OPEC and a Russia-led group of producers met to weigh surging demand from the industrialized world.

The meeting of the Organization of the Petroleum Exporting Countries comes at a time when some of the historical dynamics of the oil markets have been thrown upside down by the pandemic. Demand growth from the developed world, which for years has stagnated, is on a tear as it emerges furiously from Covid-19 lockdowns. Meanwhile, the developing world—the source of almost all new oil demand in years past—is still sputtering.

A week ago, OPEC and allied producers led by Russia were leaning toward boosting production by half a million barrels a day, with more additions possible later in the year, The Wall Street Journal reported.

Going into formal deliberations being held remotely, Saudi Arabia, OPEC’s de facto leader, and Russia agreed Thursday to take up a proposal that includes a boost of about half a million barrels a day starting in August, according to people familiar with the talks, and then gradually increasing so-called OPEC+ output by a total two million barrels through December.

OPEC’s meeting comes at a time when the historical dynamics of the oil markets have been thrown upside down by the pandemic. Demand growth from the developed world, which for years has stagnated, is on a tear as it emerges furiously from Covid-19 lockdowns. The developing world—the source of almost all new oil demand in years past—is still sputtering. That all makes gauging short-term crude demand as difficult as it has been since the world climbed back from the global economic crisis more than a decade ago.

As little as a week ago, the Organization of the Petroleum Exporting Countries and allied producers led by Russia were leaning toward boosting production by half a million barrels a day when the group, dubbed OPEC-plus, meets Thursday.

Accelerating vaccination drives in the U.S. and Europe are boosting global economic activity—and by extension, demand for oil. OPEC data showed markets needed two million barrels a day of extra oil this year. Meanwhile, the so-called Delta variant of the coronavirus has wreaked havoc in India, an anchor of oil-demand growth in normal times. China, too, is seeing signs of economic softening as consumers pull back amid isolated outbreaks there. The country is also struggling with supply bottlenecks that have hampered production.

source: The WallStreet Journal

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