Oil slumps 6% amid OPEC+ deal

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Oil prices plunged more than $4 a barrel on Monday, headed for its worst day since March, after OPEC+ agreed to boost output, stoking fears of a surplus as rising COVID-19 infections in many countries threaten demand. Member countries of the oil cartel, OPEC+ agreed to increase oil output by an initial 400,000 barrels per day.

The decision increases Nigeria’s oil output from about 1.4 million barrels per day to 1.8 million barrels per day by April 2022. In a press release OPEC said it had decided on the following: “Adjust upward the overall production by 0.4 mb/d on a monthly basis starting August 2021 up until phasing out the 5.8 mbpd production adjustment, and in December 2021 assess market developments and participating countries’ performance.

“Continue to adhere to the mechanism to hold monthly OPEC and non-OPEC Ministerial Meetings for the entire duration of the Declaration of Cooperation, to assess market conditions and decide on production level adjustments for the following month, endeavouring to end the production adjustment by the end of September 2022 subject to market conditions. Adjust, effective 1st May 2022, the baseline for the calculations of the production adjustments according to the attached table. Reiterate the critical importance of adhering to full conformity and taking advantage of the extension of the compensation period until the end of September 2021.

According to details of the deal, OPEC will initially increase output by an additional 400,000 barrels a day each month from August, and then ramp up its output by about a total of 2 million barrels per day in total, by the end of the year. The monthly output increases will subsist until December 2022. The ten major OPEC member countries will increase their capacity from 26,683 million barrels per day to 27,815 million barrels per day.