oil prices, which slipped by 4% as OPEC+ announced plans to increase production in June, highlights the intricate dynamics of global oil markets. This decision by OPEC+, a coalition of oil-producing nations, reflects their ongoing strategy to balance supply and demand amid fluctuating geopolitical circumstances and economic pressures . The reduction in West Texas Intermediate crude prices can be attributed to market reactions anticipating an oversupply situation resulting from the ramp-up in production. Investors often respond swiftly to such announcements, leading to immediate price adjustments.
U.S. crude was down $2.49, or 4.27%, to $55.80 a barrel shortly after trading opened. Global benchmark Brent fell $2.39, or 3.9%, to $58.90 per barrel. Oil prices have fallen more than 20% this year.
Saudi Arabia, agreed on Saturday to increase output by another 411,000 barrels per day in June. The decision comes a month after OPEC+ surprised the market by agreeing to surge production in May by the same amount.
The June production hike is nearly triple the 140,000 bpd that Goldman Sachs had originally forecast. OPEC+ is bringing more than 800,000 bpd of additional supply to the market over the course of two months.
The kingdom has been already been forced to cut investment in projects at the heart of Crown Prince Mohammed bin Salman’s plans for economic transformation, such as the futuristic city, Neom. The outlook for Mideast nations was downgraded last week by the International Monetary Fund, which estimates that Riyadh needs oil prices above $90 to cover government spending.
So far, the “sweating” appears to have had little success in reforming the alliance’s rogue producers.
While Iraq is making some effort to respect its targets, the same can’t be said for Kazakhstan, the group’s most flagrant quota-cheat and the main focus of Riyadh’s ire.
Kazakhstan has limited scope to rein in international oil firms like Chevron Corp. and Eni SpA as they work on projects to expand production capacity, and people familiar with the matter have previously said the country hasn’t even asked them to curtail operations. Astana exceeded its OPEC+ target by a massive 422,000 bpd in March, the group’s data show.
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