OPEC has agreed to increase oil production levels as it reduces its level of conformity to 100%.
At its 174th meeting in Vienna, the conglomerate noted that the oil market situation has further improved over the past six months, with the global economy remaining strong, oil demand relatively robust and the market rebalancing evidently continuing.
The conference also noted that confident and investment to the oil industry has returned.
The 100% conformity level will be applied as of July 1 for the remainder of the year.
In May 2018, OPEC member countries reached 152%, exceeding the required conformity level.
Ann-Louise Hittle, vice president, macro oils, at Wood Mackenzie says that the extra 1 million barrels per day means the market is less likely to slip out of control into significant oversupply or undersupply.
'It is an effective way to deal with the uncertainty we noted ahead of the meeting as one of the major problems ministers needed to address. No one yet knows what impact sanctions against Iran have on its production, nor is there certainty about the risk to Venezuela's output in the months ahead.'
Hittle says that the extra supply will ease oil market concern about supply shortages and likely preventing oil price spikes.
She adds: 'The markets should expect less oil price volatility and risk to economic growth because the announcement represents a compromise between responding to consumer pressure and the need for oil producing countries to maintain oil prices and prevent harming their economies.'
However, GlobaData estimates that OPEC production will increase by a minimum of 600,000 barrels per day to match the targeted cuts.
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