Oil prices fall for the second week in a row due to expectations of an increase in OPEC+ production
30 May 10:13
Friday was the day of another decline in oil quotations amid a possible increase in production quotas and court battles over US duties, "Komersant Ukrainian" reports citing Reuters.
According to OilPrice.com,
Brent crude oil futures fell by 24 cents (0.37%) to $63.91 per barrel as of 10:06 Kyiv time. US WTI crude lost 25 cents (0.41%) to trade at $60.69 per barrel. The July contract for Brent ends trading on Friday.
At the end of the week, both benchmarks lost 1.3% of their value.
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OPEC
The negative dynamics is largely due to the prospect of supply growth, as investors are pricing in the likelihood of another quota increase by the Organization of the Petroleum Exporting Countries and its allies (OPEC) during Saturday’s meeting of representatives of the eight member countries.
“The ground is being prepared for another significant increase in production,”
– Robert Rennie, head of commodities and carbon research at Westpac, said in a commentary. According to him, the increase may exceed 411 thousand barrels per day, which was agreed upon at two previous meetings.
The potential increase in quotas comes at a time when the global surplus has expanded to 2.2 million barrels per day, which will likely require price adjustments to stimulate supply response and restore balance, JPMorgan analysts say.
Experts expect prices to remain in the current ranges, and by the end of the year, they will fall to the high $50s.
Trump’s tariffs are working
In the United States, Trump’s tariffs remain in effect after a federal appeals court on Thursday temporarily reinstated them, overturning a Wednesday decision by the Commerce Court to immediately block the most extensive levies.
The blocking of duties on Thursday caused oil prices to fall by more than 1% as traders assessed the possible consequences. Analysts predict that uncertainty will persist while the case is heard in courts.
In general, oil prices have fallen by more than 10% since Trump announced his “Day of Liberation” on April 2, when he imposed tariffs on goods from almost all countries of the world.
On the demand side, the outlook is clouded by recession fears fueled by the tariff war. In addition to the US-China trade tensions, Washington has ordered a wide range of companies to stop supplying goods, including ethane and butane, to China without a license and revoked permits already issued to certain suppliers.
Global demand for oil improved compared to the previous week due to a recovery in US consumption with active travel during the long Memorial Day weekend, JPMorgan analysts said.
At the same time, the monthly growth in global oil demand as of May 28 is approximately 400 thousand barrels per day, which is 250 thousand barrels less than expected, experts say.
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