OPEC+ concludes supply agreement to increase production from August to December

On Sunday, OPEC+ ministers agreed to raise production by 400,000 b/d from August to December, adding 2 million b/d
to total global supply by the end of the year.

In addition, the organization, which includes allies such as the Organization of the Petroleum Exporting Countries and Russia, agreed to make new production allocations from May 2022 to resolve disputes arising from the United Arab Emirates, which wants to set a baseline increase
for its production quotas.

The UAE will add about 332,000 barrels per day from May, while Saudi Arabia and Russia will add 500,000 barrels each, and Iraq and Kuwait will each add 150,000 barrels
.

OPEC+ also plans to end all production restrictions by September 2022, but this will depend on the state of the
global oil market at that time.

As the impasse is resolved, more crude oil returns to global supply
.
But will the increase in supply overwhelm the recovery in demand, leading to lower crude oil prices?

The optimistic narrative remains that the world economy is recovering from the coronavirus pandemic, with more and more countries reopening
as people get vaccinated.

The pessimistic narrative is that the process may be happening, but not fast enough and unevenly distributed, with the recovery being faster in North America and Europe, while developing countries in Asia and Africa and South America lagged
.

So far, evidence from crude oil demand seems to support the bearish claim, especially in Asia's largest oil-importing region
.

Refinitiv Oil Research estimated Asia's crude oil imports at 22.
59 million b/d in July, down from 23.
78 million b/d in June and 23.
04 million b/d
in May.

July's weakness was mainly due to lower demand from India, the region's second-largest importer after China
.
Much of the decline can be attributed to the coronavirus outbreak in India in recent months, which has reduced fuel demand
.

But China's July imports are expected to be 9.
55 million b/d, also down from 9.
81 million b/d in June, while Japan is expected to import 2.
01 million b/d, down from 2.
27 million b/d
.

Of Asia's top four importers, only South Korea, which is likely to surpass Japan as the region's third-largest oil buyer, saw gains, and even then the increase was relatively modest, at 3.
17 million b/d in July compared with 2.
76 million b/d
last month.