Oil traders expect OPEC+ will agree a fourth bumper oil supply increase this weekend as group leader Saudi Arabia continues its bid to reclaim market share.
Eight key OPEC+ nations are preparing to discuss another hike of 411,000 barrels a day, due to take effect in August, delegates said last week. They’ll likely approve the move when they hold a video conference on Sunday, according to a survey of 32 traders and analysts.
The Organization of the Petroleum Exporting Countries and its allies have been reviving halted output at triple the initially-scheduled rate during the past three months, despite faltering fuel demand and signs of global oversupply.
The unexpected strategy pivot has heaped pressure on crude prices, which slid last week after a truce between Israel and Iran soothed fears over risks to Middle East exports. Brent futures are trading near $68 a barrel, down more than 9% since the start of the year.
OPEC’s choice will shape the trajectory for oil prices in the months ahead. Opening the taps stands to swell an impending global surplus, deepening a price slide that has tempered inflation but slashed revenues for producing nations.
Delegates have pointed to a range of reasons for the cartel’s shift. Those include meeting rising demand, as well as Saudi Arabia’s efforts to discipline overproducing members, appease President Donald Trump and regain market share.
Riyadh wants to revive idled oil output as quickly as possible, having grown frustrated with ceding sales volumes to US shale drillers and other rivals, people familiar with the matter said earlier this month.
“As the dust settles after the 12-day war, OPEC+ is expected to press ahead with the swift rollback,” said Jorge Leon, an analyst at research firm Rystad Energy A/S who previously worked at the OPEC secretariat. “There’s ample space for the alliance to recapture market share, while still keeping prices comfortably above $60.”
Thirty of the 32 survey respondents predicted that OPEC+ will ratify a boost of 411,000 barrels a day on Sunday, extending the run of similar-sized additions agreed for May, June and July. The other two forecast hikes of a smaller or unspecified size.
Russia, which led a short-lived opposition to the last super-sized increase, appears to have softened its position, signaling it will accept another boost if that’s the group’s consensus.
OPEC+ has so far agreed to restore roughly two-thirds of a 2.2 million-barrel cutback it implemented in 2023 in an effort to shore up oil prices. Another couple of hikes would complete the process, leaving the group to consider unwinding a further layer of supply restraints.
Still, the actual additions have so far been less than the promised amounts, in part because some members — such as Iraq and Russia — have forgone permitted increases to compensate for earlier overproduction. In May, the eight countries added just 154,000 of the possible 411,000 barrels.
Kazakhstan, the most egregious of the cheats, continues to flout its production limit by several hundred thousand barrels a day — a source of frustration for the Saudis. The country has limited ability to rein in the international firms expanding its production capacity, and has made little effort to do so.
Further OPEC+ increases are expected to pile more downward pressure on prices, and add to the strain on members’ finances. JPMorgan Chase & Co. projects that Brent futures will decline to the low $60s later this year, and fall further in 2026.
Nonetheless, with the organization’s quota-violators showing such limited signs of penance, Riyadh may resolve to press on with further additions.
“OPEC+ has adopted a market share strategy,” said Harry Tchilinguirian, group head of research at Onyx Capital Group. “The cat’s out of the bag, and they will not attempt to put it back in.”
No comments:
Post a Comment