All articles tagged with #supply cuts
OPEC+ has tentatively agreed to increase oil production in October by about 137,000 barrels per day, marking a shift from its previous strategy of defending prices to gaining market share, which could lead to the unwinding of 1.66 million barrels of production cuts by the end of 2024, despite ongoing market tensions and supply concerns.
Opec+ has shifted from cutting oil output to increasing supply, with several members, including Saudi Arabia and Russia, planning to unwind previous production cuts faster than expected, which could lead to a global oil surplus and lower prices in 2024. The move is driven by factors such as increased non-Opec supply, tepid demand growth, political considerations, and strategic market share goals, but it raises questions about the group's future unity and market impact.
OPEC+ is likely to extend its current oil production cuts amid rising summer demand and despite easing Middle East tensions. The group, which includes major oil producers like Saudi Arabia and Russia, is expected to maintain a 2.2 million barrels-per-day reduction into the third quarter. Analysts suggest that while the market has priced in these cuts, any changes could significantly impact oil prices, potentially pushing them closer to $100 per barrel. The coalition is also focusing on ensuring compliance among its members and balancing its relationship with the U.S.
The OPEC+ alliance is facing the risk of a repeat of last year's oil market boom and bust as Brent crude prices surged above $90 a barrel, with analysts warning of a potential increase to $100. Despite robust fuel demand and geopolitical tensions in the Middle East, Saudi Arabia and its partners have signaled their intent to continue squeezing supplies. The situation mirrors the market narrative of 2023, when high oil prices led to fears of demand destruction and a flood of additional supplies, ultimately causing a sharp drop in Brent futures. The outcome of the next OPEC+ meeting in early June will be crucial in determining whether history will repeat itself.
Saudi Arabia, along with its allies Kuwait and the United Arab Emirates, has announced the extension of oil production cuts through June, in an effort to support oil prices amidst modest demand growth. The decision comes as analysts predict an excess of oil supply in the first half of the year, and the gradual return of the one million barrels a day cut will be subject to market conditions. This move reflects OPEC's cautious approach to returning supplies to the market, as non-OPEC countries like the United States and Russia continue to increase their oil production.
Analysts are divided on whether oil prices will hit $100 a barrel. The bulls argue that resilient oil demand, supply cuts, and a forecasted supply deficit will push prices higher. However, the bears believe that China's oil demand has already peaked, and pressure from high oil prices could dampen the global economy. They also point out that crude inventories remain above the five-year average. While the bulls may have the upper hand in the short run, the bears expect prices to stabilize next year as new production arrives and demand is subdued. The possibility of bigger production cuts by Saudi Arabia remains uncertain, which could impact prices.
Saudi Arabia's energy minister, Prince Abdulaziz bin Salman, stated that the decision to extend crude oil supply cuts with Russia is not aimed at increasing prices, as Brent futures approach $95 a barrel and analysts predict a potential rise to triple digits. The voluntary production and export declines implemented by OPEC+ members, including Saudi Arabia and Russia, are intended to balance the market and make decisions based on data and clarity. The increase in oil prices has led to speculation of a short-term return to $100 per barrel. Chevron CEO Mike Wirth acknowledged the possibility of reaching this threshold, while Saudi Arabia criticized the International Energy Agency's forecasts and advocated for a dual approach to decarbonization. The United States has remained relatively silent on the latest OPEC+ reductions as it balances domestic interests with foreign policy objectives.
Oil prices dipped as a stronger US dollar and concerns over Chinese economic growth weighed on fuel demand, but extended supply cuts by Saudi Arabia and Russia helped keep Brent crude above $90 a barrel. Brent crude fell 0.2% to $90.50 a barrel, while US West Texas Intermediate crude dropped 0.5% to $87.08 a barrel. The voluntary supply cuts of 1.3 million barrels per day by Saudi Arabia and Russia, announced last week, have supported oil prices. The International Energy Agency and OPEC are set to release their monthly reports this week, which could further impact prices.
Oil prices have surged by over 25% since late June as supply cuts by key OPEC+ players, including Saudi Arabia and Russia, continue to squeeze the market. Brent International topped $90 per barrel for the first time since November, while West Texas Intermediate crude hovered above $87 per barrel. Despite a slower-than-expected recovery in China's economy and increased production output by US producers, experts predict that crude oil prices will either remain stable or continue to rise due to ongoing supply cut initiatives and Saudi Arabia's need to fund internal projects. The market will closely monitor the demand outlook, particularly in China, which has significant inventories and storage capacity.
Oil prices remained stable as expectations grew for major oil producers to maintain tight supplies, while hopes for the Federal Reserve to keep interest rates unchanged to support the US economy also contributed to market sentiment. Brent crude futures rose slightly to $88.60 a barrel, while US West Texas Intermediate crude (WTI) futures increased to $85.57 a barrel. The anticipation of additional supply cuts from Russia and Saudi Arabia has been driving crude oil prices, although the steady increase in US oil production may limit significant price gains. Saudi Arabia is expected to extend its voluntary 1-million-barrel per day cut into October, while Russia has already announced export cuts for September.
Oil prices slipped about 1% due to concerns about China's economic recovery and a stronger dollar, after seven weeks of gains driven by tightening supply from OPEC+ cuts. China's sluggish economic recovery and a stronger U.S. dollar could depress prices, but OPEC+ has indicated it would do whatever it takes to tighten supply and stabilize markets. Supply cuts by Saudi Arabia and Russia are expected to erode oil inventories over the rest of this year, potentially driving prices even higher.
Oil prices slipped on Monday due to concerns about further interest rate hikes that could curb demand, balancing the prospect of a tighter market due to supply cuts from OPEC+ producers. Brent crude was down 0.1% at $85.03 a barrel, while US West Texas Intermediate slipped 0.2% to $80.55. The US dollar rose after US jobs data pointed to a tight labour market, firming up expectations of another Federal Reserve rate hike.