Members of oil producer cartel OPEC and allied countries have agreed to leave most of their existing oil production cuts in place as the spread of new coronavirus variants prolongs concerns about economic weakness.
OPEC countries led by Saudi Arabia joined with non-members led by Russia to reach the deal in an online meeting Thursday. Most significantly, one million barrels per day in voluntary cuts from Saudi Arabia will remain in place at least through April.
Many analysts had expected a small production increase and the decision not to increase production quickly sent crude oil prices higher. The U.S. contract, which had plunged last year as the pandemic restrictions on businesses devastated demand for energy, spiked 5.6% higher on the day on Thursday to $64.70 a barrel.
“I hate to disappoint those who tried to predict what we would do,” said Saudi energy minister Abdulaziz bin Salman.
Russia’s deputy prime minister Alexander Novak expressed “careful optimism” that the oil market was stabilizing. Under the deal, non-OPEC countries Russia and Kazakstan can make small production increases.
The so-called OPEC Plus - which includes countries like Russia that are not part of the cartel but have been coordinating production in recent years - made deep cuts in output in 2020 to stave off a collapse in prices.
As more economic activity returned around the world, the group decided to add back 500,000 barrels per day in December. Saudi Arabia in January voluntarily cut 1 million barrels per day, supporting markets for crude oil.