LONDON: The Organisation of the Petroleum Ex­­porting Countries (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, four Opec+ sources told Reuters.

The increase means Opec and Russia, a group known as Opec+, would move to cutting production by 7.2 million bpd, or seven per cent of global demand from January, compared with current cuts of 7.7m bpd.

The curbs are being implemented to tackle weak oil demand amid a second Covid-19 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.

Four Opec+ sources said the group would now gather every month to decide on output policies beyond January and monthly increases are unlikely to exceed 500,000 bpd.

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 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.

Crude prices were little changed after the Organisation of the Petroleum Exporting Countries and Russia decision at around $48 a barrel.

Published in Dawn, December 4th, 2020