LONDON/DUBAI/MOSCOW: OPEC and Russia on Thursday agreed to a modest oil output increase from January by 500,000 barrels per day but failed to find a compromise on a broader and longer term policy for the rest of next year. The increase means the Organization of the Petroleum Exporting Countries and Russia, a group known as OPEC+, would move to cutting production by 7.2 million bpd, or 7% of global demand from January, compared with current cuts of 7.7 million bpd.

The curbs are being implemented to tackle weak oil demand amid a second coronavirus wave. OPEC+ had previously been expected to extend existing cuts until at least March. But after hopes for a speedy approval of anti-virus vaccines spurred an oil price rally at the end of November, several producers started questioning the need to keep such a tight rein on oil policy, as advocated by OPEC leader Saudi Arabia.

OPEC+ sources have said Russia, Iraq, Nigeria and the United Arab Emirates have all to a certain extent expressed interest in supplying the market with more oil in 2021. Russian Deputy Prime Minister Alexander Novak said the group would now gather every month to decide on output policies beyond January with monthly increases not exceeding 500,000 bpd. He said compensatory cuts for countries which overproduced in previous months had been extended until March 2021.

OPEC+ has to strike a delicate balance between pushing up oil prices enough to help their budgets but not by so much that rival US output surges. US shale production tends to climb above $50 a barrel. Monthly meetings by OPEC+ will make price moves more volatile and complicate hedging by US oil producers. After the OPEC decision, crude prices extended gains, trading 1.2% higher at $48.83 a barrel by 1900 GMT.