FX.co ★ OPEC reached an agreement, but the World Bank still has a rather low economic forecasts

On Tuesday, January 5, OPEC reached an agreement, which is to retain the current production volume for the next two months, with the exception of Russia and Kazakhstan, as both countries will already begin increasing their output by a total of 75,000 bpd. This means that the cuts will be eased by 7.125 million bpd in February, and then by 7.05 million in March.

Accordingly, in order to offset the increased supply, Saudi Arabia will decrease its output by 8.5 million barrels. And although the exact details of the deal are yet to be released, the price of oil has already begun to grow rapidly in the charts. Yesterday, it already reached the high recorded last February 2020. Most likely, the decision to reduce output was made by Saudi Arabia itself, amid news of the rapid spread of the new strain of coronavirus, as well as on the new quarantine measures in Europe.

At the time of writing, the cost of March futures for Brent oil is at $ 53.99 per barrel, which is 1.14% higher than the closing price of the previous session.

The next meeting of OPEC members is on March 4, while the meetings of its monitoring committee are scheduled for February 3 and March 3.

Last May 2020, OPEC decided to decrease production by 9.7 million bpd. Then in August of the same year, the committee eased the cut and changed it to only 7.7 million bpd. For this month, OPEC set it to 7.2 million.

The group said it would make decisions on oil production every month, all while assuring the public that it would depend on market conditions. However, they have a condition that it has to be no more than 500,000 bpd.

But despite this news, the World Bank still released rather low economic forecasts for 2021. According to their report, the world economy will grow by 4%, but on the condition that COVID-19 vaccinations continue on a large scale throughout the 12 months.

Last year, global GDP fell by 4.3%, which is less significant than the projected drop of 5.2%. This is good news since it means that the recession in the countries was not as deep as expected.

In 2022, the World Bank expects the global economy to grow by 3.8%, mainly due to the rapid and large-scale introduction of vaccines. However, the short-term outlook is highly uncertain. In the worst case scenario, that is, with a continuing increase in COVID-19 incidence and delay in the widespread introduction of vaccines, economic growth will be limited to 1.6%. But looking at the future with optimism, the world economy has a chance of growing by up to 5%.