Crude oil prices set for another weekly decline as OPEC+ boosts production

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Crude oil prices are expected to decline for another week after OPEC+ decided to increase production by 411,000 barrels daily in July, marking the third consecutive hike. This decision, made during a virtual monthly meeting over the weekend, has sent crude prices sinking. As of the weekend’s close, Brent crude was trading at $62.78 per barrel, while West Texas Intermediate was at $60.79 per barrel.

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“OPEC+ isn’t whispering anymore,” said Jorge Leon, an analyst at Rystad Energy A/S. “May hinted, June spoke clearly, and July came with a megaphone. “This recent increase follows equally sized hikes in May and June, deviating from the group’s years-long effort to support global oil prices.

Some member states, like Russia, expressed reservations about the supply increase, recommending a pause. The production hike is expected to add to the global surplus, which has widened to 2.2 million barrels per day, according to JPMorgan analysts. This could necessitate a price adjustment to prompt a supply-side response and restore balance.

Reasons Behind OPEC+’s Pivot

Delegates have offered various explanations for Riyadh’s shift in strategy:

– Appeasing President Trump: Some officials suggest the kingdom is trying to appease the US president.

– Reclaiming Market Share: Others believe Saudi Arabia aims to reclaim market share lost to US shale drillers and rivals.

– Satisfying Demand: Some delegates assert OPEC+ is simply meeting robust demand.

– Punishing Non-Compliant Members: Others claim Saudi Arabia seeks to punish members like Kazakhstan and Iraq for exceeding output quotas.

Impact on Oil Market

The strategy transition has had significant consequences:

– Financial Peril for Oil Producers: Crude’s pullback poses financial risks for oil producers in OPEC+ and worldwide.

– Shale Oil Heartlands: The downturn affects America’s shale oil heartlands, where companies like Diamondback Energy Inc. report peaked production.

– Price Control Moves: OPEC+’s recent price control moves have led to supply and demand forces cancelling each other out.

Future Outlook

Analysts expect similar production increases through the end of the third quarter as OPEC+ focuses on defending market share. ING commodity analysts wrote, “We expect similar increases through until the end of the third quarter, as the group increases its focus on defending market share.” The combination of geopolitical uncertainty, domestic economic politics, and ongoing supply and demand imbalances will likely influence the oil market’s direction.

Key Factors Driving the Oil Market

– Geopolitical Situation: Ongoing uncertainty in the Middle East and Eastern Europe impacts both supply and demand.

– Domestic Economic Politics: Economic data, such as the US economy’s 0.3% shrinkage in Q1 2025, affects oil prices.

– Supply and Demand: Strong demand, as indicated by the 4.24 million barrel decline in US oil inventories, could lead to higher prices.

Price Projections

Saudi Arabia is expected to lower its official oil prices for July to their lowest levels since January, providing cheap oil to the Asian market. The EU and UK are pushing for a price cap on Russian oil at $50 per barrel, down from $60

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