Monitoring oil demand will be much more important than ever, after the Organization of the Petroleum Exporting Countries and its allies, together known as OPEC+, on Monday kept their current agreement to gradually raise their production of crude oil.

The decision led to a rally in oil prices to multiyear highs as traders anticipate that the higher output won’t be enough to meet growing demand for oil.

OPEC+ is “well aware of the global inventory draws, maintenance work and rising demand” for oil, but “chose to wait until later this year to adopt a bolder supply approach,” said Bjørnar Tonhaugen, head of oil markets at Rystad Energy, in commentary emailed Monday. “OPEC+ holds both the knife and the cake in the oil market, especially as the group boasts the lion’s share of the remaining unused supply capacity in the world.”

This “supply capacity control” makes the group of producers the only market player that can “significantly redirect market conditions, apart from any unplanned outages or weather phenomena — justifying the extended bullish reaction after the meeting’s outcome became clear,” he said.

At its meeting Monday held by videoconference, OPEC+ said it will stick to the production agreement it reached in July to raise overall monthly production by 400,000 barrels a day from August and onward, as the group moves to phase out the remaining 5.8 million barrels per day of production cuts it put in place last year. On Monday, the group said the decision includes a 400,000 barrel-per-day increase in November.

Overall, OPEC discipline to mandated cuts had been “extremely strong” in 2020 to 2021, but the “advent” of stronger pricing with Brent crude above $80 a barrel may “test the resolve more strongly than when prices were weak,” said Stewart Glickman, energy equity analyst at CFRA Research. He also pointed out that the “rapidly-rising prices” could lead to some demand destruction in the oil market.

For now, upstream oil operations — exploration and production — are enjoying a “windfall” from the rise in spot prices and should see “strongly improved cash flows in the second half of 2021,” said Glickman.

On Monday in the futures market, U.S. benchmark West Texas Intermediate crude CLX21, 2.73% CL.1, 2.73% rose $2.01, or 2.7%, to $77.89 a barrel on the New York Mercantile Exchange, which would mark the highest front-month contract settlement since November 2014, according to Dow Jones Market Data. Global benchmark Brent crude BRNZ21, 2.25% BRN00, 2.25% tacked on $2.35, or 3%, to $81.63, on track for the highest finish since October 2018.

Monitoring changes in the oil market will be essential. Now that prices are “sitting comfortably at high levels without the threat of extra OPEC+ supply, other than the planned one, we are entering a period when demand needs closer monitoring,” said Tonhaugen. “The recovery of the economy, the potential of a cold winter and fuel switching from [natural] gas to oil in Asia suggest a rather quick demand increase to as much as 100 million [barrels per day] in December.”

“Now that prices are “sitting comfortably at high levels without the threat of extra OPEC+ supply, other than the planned one, we are entering a period when demand needs closer monitoring.”

— Bjørnar Tonhaugen, Rystad Energy

Whether OPEC+ can raise output as promised is not a sure thing, however.

The group of producers lifted its crude production by “just” 50,000 barrels per day in August as disruptions and maintenance issues in a few countries capped the group’s production gains, according to a survey from S&P Global Platts released in early September.

The survey showed that OPEC’s 13 members pumped 26.97 million barrels per day in August, up 140,000 barrels per day from July, while nine non-OPEC partners, led by Russia added another 13.29 million barrels per day, which was down 90,000 barrels per day from a month earlier. Kazakhstan underwent major field maintenance that results in an output decline, while Nigeria suffered a big oil spill near a major export terminal that shut in production, S&P Global Platts said.

“There has been some market chatter about some countries within OPEC+ not being able to meet production increase, most notably Russia,” Rebecca Babin, senior energy trader at CIBC Private Wealth, U.S., told MarketWatch.

She pointed out that Saudi Arabia and the United Arab Emirates have enough spare capacity to pick up the slack if some countries are unable to meet quotas in the short term. So, the issue if more about “how the group will work through adjusting quotas, as opposed to if there is actually enough spare capacity…to increase production,” said Babin.

Still, the group’s refusal to “return supply to the market more rapidly” means that the market will remain in a supply deficit in the fourth quarter, said Kieran Clancy, commodities economist at Capital Economics, in a note Monday after the OPEC+ decision. “That suggests that oil prices will remain elevated for at least the remainder of this year.”

Outside of OPEC+, if the oil market encounters any oil supply outages, that would likely tighten the oil supply and demand balance even further, which “justifies why the market remains bullish and on edge for the time being,” said Rystad Energy’s Tonhaugen.

OPEC+ said it will hold its next ministerial meeting on Nov. 4.