Oil prices dropped on Monday after OPEC+ agreed to a significant production hike in September, with Brent crude futures falling 43 cents to $69.24 a barrel and US West Texas Intermediate crude down 39 cents to $66.94 a barrel.
The OPEC+ decision to raise oil production by 547,000 barrels per day for September marks a full and early reversal of its largest tranche of output cuts. This move is part of the group’s efforts to regain market share amid concerns over potential supply disruptions linked to Russia.
Amrita Sen, co-founder of Energy Aspects, noted, “Given fairly strong oil prices at around $70, it does give OPEC+ some confidence about market fundamentals.” She added that the market structure is also indicating tight stocks.
Giovanni Staunovo of UBS said, “So far the market has been able to absorb very well those additional barrels, also due to stockpiling activity in China. All eyes will now shift to the Trump decision on Russia this Friday.
Jorge Leon of Rystad Energy and a former OPEC official commented, “OPEC+ has passed the first test,” as it has fully reversed its largest cut without crashing prices. “But the next task will be even harder: deciding if and when to unwind the remaining 1.66 million barrels, all while navigating geopolitical tension and preserving cohesion.”
The OPEC+ group, which includes 10 non-OPEC oil-producing countries like Russia and Kazakhstan, had been curtailing production to support oil prices. However, it reversed course this year to regain market share, spurred by calls from US President Donald Trump for OPEC to ramp up production.
Key production hike details include:
– September Production Hike: 547,000 barrels per day
– Market Share Regain: OPEC+ aims to regain market share amid potential supply disruptions linked to Russia
– Output Cuts Reversal: Full and early reversal of OPEC+’s largest tranche of output cuts, plus a separate increase in output for the United Arab Emirates amounting to about 2.5 million bpd
OPEC+ members are scheduled to meet again on September 7 to discuss potential output cuts totaling around 1.65 million bpd
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