The OPEC group of oil-producing countries and its allies agreed Tuesday to maintain planned production increases, as pandemic-hit demand for crude recovers.

The 23-nation OPEC+ alliance implemented sharp output cuts to support prices after the coronavirus pandemic crushed the global economy last year.

But since early May the cartel has started implementing more generous production increases as oil prices have recovered and the health situation improves in developed economies.

At the end of a short meeting on Tuesday which lasted barely half an hour, the group agreed to continue rises up until July adding up to 1.2 million barrels per day (bpd), to which will be added a further million bpd which had been voluntarily withdrawn by Saudi Arabia.

However, the alliance took no decision on what policy to follow from August onwards, and did not discuss the possibility of Iranian oil returning to the market in the coming months.

Among OPEC's allies, Russia has in recent times pushed for faster rises in output with traditional OPEC kingpin Saudi Arabia supporting a much more cautious approach.

However, ahead of Tuesday's meeting even Saudi Energy Minister Prince Abdulaziz bin Salman pointed out that though there were "still clouds on the horizon", "demand has improved in some of the world's bigger markets, like the USA and China" and praised the global vaccine rollout.

For his part Russian Deputy Prime Minister Alexander Novak said: "We see that demand has increased, that prices have stabilised," and spoke of a "normalisation" of the global economy.

OPEC has remained optimistic in its predictions for 2021, expecting demand to reach 96.5 million bpd, an increase of six million on 2020 levels.

Ann-Louise Hittle, vice president Macro Oils, at Wood Mackenzie, said of Tuesday's decision: "The outcome is one we expected".

When oil facilities in war-torn Libya began producing again at the end of 2020, the market received an additional million barrels a day
When oil facilities in war-torn Libya began producing again at the end of 2020, the market received an additional million barrels a day AFP / -

"Sticking to increases planned... is what the market needs," said Hittle, adding: "Demand growth is outpacing supply gains even with the agreed month-by-month OPEC+ production increases taken into account."

This has been reflected in recent movements in crude prices.

World oil prices continued their recent upward trend on news of the OPEC+ decision, with the European Brent and US WTI benchmark contracts rising by around two percent at 1600 GMT on Tuesday, with WTI reaching levels unseen since October 2018.

Aside from demand, the other factor OPEC and its allies must take into account are the actions of other oil-rich states such as the world's leading producer, the United States.

Changes are also underfoot among the alliance's members themselves.

After facilities in war-torn Libya began producing again from the end of 2020, eventually adding one million bpd to the market, all eyes will be on Iran.

If negotiations in Vienna on the full revival of the 2015 nuclear deal are successful, it could lead to many economic sanctions on the Islamic republic being lifted, including the US embargo on Iranian oil exports.

If Iran were able to get back to its level of exports three years ago -- when then US president Donald Trump withdrew from the nuclear deal and reimposed sanctions -- it could mean an extra 1.5 million bpd coming to the market.

"We anticipate that Iran's production levels will be a contentious topic at future meetings," said Samuel Burman from Capital Economics.

Iranian Oil Minister Bijan Namdar Zanganeh on Monday told his ministry's Shana news agency that the country's "priority" would be to nearly triple its current output level.