The Organization of the Petroleum Exporting Countries and Russia agreed to increase oil production next month despite reduced demand as a result of the coronavirus.
OPEC said Thursday existing production curbs will be relaxed starting Jan. 1. The group said production for all members will be adjusted by about 0.5 million barrels a day.
Analysts had expected the alliance and world producing countries to extend the cuts by at least another three months given demand. However, oil futures prices have recovered recently.
Brent futures hit their highest in November since March on prospects for a rebound in demand mainly owing to positive sentiment over the news of vaccine developments.
OPEC and its allies were scheduled to meet earlier in the week but the meeting was postponed. Several members met privately in separate gatherings.
The alliance previously cut production by 9.7 million barrels a day - roughly 10% of world output - in May and June following the imposition of travel restrictions and border lockdowns. Brent crude hit its lowest - dropping below $20 a barrel.
In August the alliance decided to increase supply by 2 million barrels a day as the world economic situation improved. However, a second wave of lockdowns dealt a fresh blow to demand - putting into question OPEC's decision to boost production.
Analysts at FXTM said oil producing countries are banking on an increase in economic activity and travel in the coming months given the promising news of several coronavirus treatments. Demand in some parts of the world has also gradually recovered, particularly in Asia.
Analysts said the environment was still unfavorable for the oil industry. An increase in production could lead to oversupply if demand doesn't immediately catch up.
Market experts said there needs to be more travel after an effective vaccine is rolled out to ensure oil prices remain stable.
