The headquarters of the Organization of Petroleum Exporting Countries (OPEC) in Vienna, Austria on December 17, 2018.

Beata Zawrzel | NurPhoto | Getty Images

LONDON – A group of some of the world’s most powerful oil producers agreed on Tuesday to continue to gradually ease production cuts amid a rebound in oil prices.

OPEC and its oil-producing allies, known as OPEC +, will increase production in July, following the group’s decision in April to bring 2.1 million barrels a day to market between May and July.

A production policy beyond July has not been decided and the group will meet again on July 1st.

The international benchmark Brent crude oil futures were trading at $ 71.17 a barrel on Tuesday, up around 2.7%, while the West Texas Intermediate Crude Oil futures traded at $ 68.65, up more than that than 3% and the highest level of the contract in more than two years. The price of oil has risen by more than 30% this year.

The Middle East dominated group, responsible for more than a third of the world’s oil production, is trying to balance an expected increase in demand with the potential for an increase in Iranian production.

The alliance announced massive cuts in crude oil production in 2020 to prop up prices as the coronavirus pandemic coincided with a historic demand shock.

Before the meeting, analysts expected the group to keep production constant.

“I think the event itself will be a non-event. We expect them to basically reconfirm the plan they came up with on April 1st,” said Jeffrey Currie, global director of natural resources research at Goldman Sachs CNBC’s “Street Signs Europe” on Tuesday. “I think the bigger problem behind this is how are you going to deal with Iran?”

Iran is in talks with six world powers to revive its 2015 nuclear deal. Restoring a deal could lead to more oil in the world market in the coming months.

“It is too early to give concrete figures on Iran,” said Currie. “I think the best you can expect in terms of dealing with Iran is to say that you are ready to offset any increases in Iran. That could be the positive surprise from this meeting.”

The Iranian flag is seen in front of the building of the headquarters of the International Atomic Energy Agency (IAEA) ahead of a press conference by Rafael Grossi, Director General of the IAEA, on the monitoring of the Iranian nuclear energy program on May 24, 2021 in Vienna, Austria.

Michael Gruber | Getty Images News | Getty Images

OPEC Secretary General Mohammad Barkindo said Monday he doesn’t think a higher Iranian bid would be a cause for concern.

“We assume that the expected return of Iranian production and exports to the world market will take place in an orderly and transparent manner,” Barkindo said in a statement.

Iran is likely to act “constructively”

“I think everyone expects Iran to add a lot of volume. Beyond the July increase, they are unlikely to make any commitments, ”Amrita Sen, chief oil analyst at Energy Aspects, told CNBC’s Squawk Box Europe. on Tuesday.

“We know that as demand increases, we will need more OPEC kegs, but I think Iran will be the big question mark for them,” Sen said.

OPEC + originally agreed to cut oil production by a record 9.7 million barrels a day last year as global fuel demand collapsed before easing cuts to 7.7 million and eventually to 7.2 million from January. By July, the group’s production cuts will be 5.8 million.

“The most momentous problem for OPEC + in the short term concerns the potential increase in Iranian production as a result of the US and Iran’s return to JCPOA compliance,” Eurasia Group analysts said in a research note, referring to the acronym for the nuclear deal: the joint comprehensive Action plan.

Risk Advisory analysts said progress in successive rounds of talks would allow a return to the deal likely in the third quarter of 2021.

“In the medium term, OPEC + will most likely adjust its policies to prevent the addition of Iranian barrels from derailing its balancing strategy,” they continued. “Saudi Arabia will likely turn to Russia to better understand the scope of Iranian policies in drawing up adjustment plans. Iran would also likely act constructively as higher oil prices serve its own interests.”

– CNBC’s Pippa Stevens contributed to the coverage.