OPEC+ Predictions Begin to Happen
Oil prices appear to be facing another major challenge and are starting to follow OPEC+'s projections at the beginning of the year that this year will experience a decline. After experiencing a slight increase after the tariff war, oil has weakened again.
Crude oil prices opened this week with a 4% decline after OPEC+ announced its intention to increase production by 411 thousand barrels per day starting in June. This change is a gradual elimination of voluntary restrictions by major producers, including Saudi Arabia and Russia, which previously amounted to 2.2 million barrels per day.
The decision surprised the market because previously the market had only expected an increase of 244 thousand barrels. These steps were actually taken by Saudi Arabia against the loss of market share due to increased production by countries outside OPEC+.
Saudi Arabia's strategy assumes lower oil prices in the coming months, which will only benefit the most sustainable projects. Saudi Arabia used a similar tactic in 2014. At that time, as now, oil prices plunged due to slowing end demand and the desire to increase production, as well as high drilling activity in the US due to the shale revolution. From a peak in July 2014, prices have fallen by three-quarters, hitting a low a year and a half later.
Oil has already faced price volatility like this in 2020 when record U.S. production coincided with a supply dispute between Russia and Saudi Arabia. The COVID-19 pandemic exacerbated the selloff. As a result, Brent has lost about 72% from its January 2020 peak, and nearby WTI futures have entered negative territory. This year itself, demand for oil is also expected to decline from major oil users such as China, as well as rising oil production from OPEC+ and the U.S., which will bring prices down.
Source : (mrv@Newsmaker)
