Oil prices fall after OPEC+’s decision to increase production
4 August 08:25
Oil prices declined on Monday after OPEC agreed to another significant production increase in September, while concerns about a slowdown in the US economy increased pressure on the market. This is reported by "Komersant Ukrainian" with reference to Reuters.
Thus, according to OilPrice.com, Brent crude oil futures fell 20 cents, or 0.29%, to $69.47 per barrel as of 08:15 Kyiv time, while US WTI crude oil was trading at $67.18 per barrel, down 15 cents, or 0.22%. On Friday, both contracts closed about $2 per barrel lower.
What OPEC has decided
The Organization of the Petroleum Exporting Countries and their allies, known as OPEC, agreed on Sunday to raise oil production by 547,000 barrels per day in September. This was the latest step in a series of accelerated production increases aimed at regaining market share. The organization justified its decision by citing a healthy economy and low inventories.
This step, which is in line with market expectations, means the complete and early cancellation of OPEC’s largest package of production cuts, as well as a separate production increase for the United Arab Emirates. In total, this amounts to about 2.5 million barrels per day, or about 2.4% of global demand.
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What market analysts say
Goldman Sachs analysts expect that the actual increase in supply from the eight OPEC countries, which have been increasing production since March, will be 1.7 million barrels per day, or about 2/3 of the announced one, as other members of the group have cut production after the previous overproduction.
“While OPEC policy remains flexible and the geopolitical outlook uncertain, we assume that OPEC will keep its production target unchanged beyond September,”
– they noted, adding that the steady growth in non-OPEC production is likely to leave no room for additional barrels from OPEC.
RBC Capital Markets analyst Helima Croft said:
“The bet that the market will be able to absorb additional barrels seems to have paid off for reserve capacity holders this summer, as prices are not that far from pre-tariff levels.”
What will India do?
At the same time, investors remain cautious about possible additional US sanctions against Iran and Russia, which could disrupt supplies. As you know, US President Donald Trump has threatened to impose 100% secondary duties on buyers of Russian oil in an attempt to force Russia to end the war in Ukraine.
At least two ships carrying Russian oil destined for refineries in India have changed direction after new US sanctions, trade sources said on Friday, confirming LSEG’s data on trade flows.
However, two Indian government sources told Reuters on Saturday that the country will continue to buy oil from Russia despite Trump’s threats.
The situation in the United States
Concerns about the impact of US tariffs on global economic growth and fuel consumption are also weighing on the market, especially after US economic data on employment growth came in below expectations on Friday.
US Trade Representative Jamieson Greer said on Sunday that the duties imposed last week on dozens of countries are likely to remain in place rather than be reduced as part of ongoing negotiations.
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