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OPEC and Russia Agree to Keep a Lid on Oil Production, Sending Prices Higher

The Organization of the Petroleum Exporting Countries and its allies stuck with current quotas for April, with some exceptions. Saudi Arabia offered a similar compromise to the one it reached with Russia in January.

Saudi Aramco’s Ras Tanura oil refinery and terminal in Saudi Arabia. Saudi officials have pushed to keep production down in order to keep prices high.Credit...Ahmed Jadallah/Reuters

The Organization of the Petroleum Exporting Countries and its allies set aside proposals for expanding output and decided on Thursday to keep a tight rein on production, sticking with current quotas for April with some exceptions.

The news was not what analysts had expected. Brent crude, the global benchmark, jumped almost 5 percent. The decision by the group, known as OPEC Plus, raised concerns of unwelcome price rises in the future.

The outcome is a win for Saudi Arabia, the de facto leader of OPEC. Its oil officials had counseled against raising production, arguing that the global economic recovery from the pandemic is still fragile and could be derailed by new coronavirus variants that may be less susceptible to vaccines.

“The Saudis have ensured an outcome” that is far more likely to lead to higher prices than was expected before the meeting, said Amrita Sen, head of oil market analysis at Energy Aspects, a market research firm.

The Saudis are still smarting from the collapse in prices last spring, which they helped cause by engaging in a price war with Russia. Like many other countries with large oil reserves, Saudi Arabia relies on oil revenues for the bulk of its government finances. Its leaders also want to spend hundreds of billions of dollars on ambitious development projects like Neom, a futuristic city going up in a remote area.

“The right course of action is to keep our powder dry,” Prince Abdulaziz bin Salman, the Saudi oil minister, said at the beginning of the group’s meeting on Thursday. “Let us be certain that the glimmer we see ahead is not the headlight of an oncoming express train.”

Some analysts say Saudi Arabia could end up squeezing an oil market in which thirst for oil could recover faster than Riyadh anticipates.

Roger Diwan, a vice president at IHS Markit, a research firm, said the Saudi minister’s cautious approach could wind up creating problems for his customers.

The prince’s reluctance to put more oil on the market, Mr. Diwan said, creates a “price spike risk.”

Prince Abdulaziz dismissed such concerns at a news conference after the meeting.

“I don’t think it will overheat,” he said of the oil market. He insisted that he wanted to see real proof of a strong economic recovery that would lead to increased oil consumption.

Before the meeting, some analysts said the oil market, which built up a glut last year, was already approaching balance and that there was room for additional production without undermining prices. After collapsing last year, oil prices have risen to pre-pandemic levels in recent weeks.

Vaccination programs against the coronavirus are gathering pace, potentially leading to increased economic activity, more air travel and greater demand for oil this year. In addition, production growth from shale producers in the United States is expected to be restrained this year.

Petroleum heavyweights that have been curtailing production, like Russia and the United Arab Emirates, have been eager to put some of that oil back on the market.

The Saudis largely held the line with the same sort of compromise they reached at the last such meeting in January.

As part of the agreement, Russia, which has been pushing hardest for increases, will be allowed to produce an additional l130,000 barrels a day, while Kazakhstan was granted a boost of 20,000 barrels a day.

After January’s OPEC meeting, Saudi Arabia voluntarily agreed to cut its own production by one million barrels a day, to about 8.1 million. That cut had been scheduled to expire in April, but on Thursday Saudi officials said they would continue it for at least another month.

The outcome of January’s meeting was an unusual compromise that allowed modest increases by Russia and Kazakhstan. Once again, the group has reached a somewhat awkward deal, figuring that despite disagreements it is better to present at least a facade of unity. The Saudis have also shown that they are willing to sacrifice production for higher prices.

Stanley Reed has been writing from London for The Times since 2012 on energy, the environment and the Middle East. Prior to that he was London bureau chief for BusinessWeek magazine. More about Stanley Reed

A version of this article appears in print on  , Section B, Page 5 of the New York edition with the headline: OPEC Plus To Keep Lid On Output. Order Reprints | Today’s Paper | Subscribe

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