Global oil prices hit their highest levels in three years today as fuel demand continued to pick up amid the reopening of the global economy after the pandemic.
Oil prices plummeted on Monday after Opec+ broke through a deadlock to reach an agreement on oil production.
Brent Crude and WTI Crude both fell sharply on the news, down 2.41 percent and 2.55 percent respectively.
Opec+ agreed to increase oil production by 400,000 barrels a day on Sunday. As part of the deal, the group will reverse an existing cut of 5.8m barrels per day by September next year.
The losses have been driven by growing concerns that a resurgence in Covid cases could trigger a reintroduction of restrictions on economic activity, which would hit demand for fuel in developed economies and put downward pressure on prices.
The group of oil-producing nations reached the deal after weeks of stalled talks due to the United Arab Emirates refusing to increase oil production without scaling up its baseline quota.
Oil prices have surged to record highs in recent weeks due to demand outstripping supply.
Last year, Opec+ agreed to cut output by 10 million barrels per day to offset plummeting demand for fuel triggered by the pandemic. However, demand for oil has rebounded sharply as economies around the world emerge from Covid restrictions.
The alliance has gradually wound down the pandemic-induced supply cuts to 5.8 million bpd.
Last week, the International Energy Agency warned that prices will remain elevated unless supply pressures are eased.
Analysts were buoyed by the deal, forecasting that the oil market will remain tight despite the increase in supply.
“Even with higher output, the market remains relatively tight,” ANZ Research said.
Goldman Sachs analysts said that oil producers were likely to focus on “maintaining a tight physical market all the while guiding for higher future capacity and disincentivising competing investments.”