Background on OPEC+ and its Recent Decision
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, agreed on Saturday to increase production by 548,000 barrels per day (bpd) for August. This is above the previous increases of 411,000 bpd for the past three months. This decision will reintroduce almost 80% of the 2.2 million bpd of voluntary cuts from eight OPEC producers, according to analysts at RBC Capital, led by Helima Croft.
Impact of OPEC+ Production Increase
However, the actual increase in production has been smaller than anticipated so far, with most of the supply coming from Saudi Arabia. In a sign of confidence in oil demand, Riyadh raised the August price for its signature Arab Light crude to a four-month high for Asia.
Analysts at Goldman expect OPEC+ to announce a final increase of 550,000 bpd for September at their next meeting on August 3.
US Tariff Concerns and Market Adjustment
Oil prices were also under pressure due to US authorities announcing a delay in the implementation of tariffs without providing details on the changes. Investors are concerned that higher tariffs could slow economic activity and oil demand.
Market Performance
- Brent futures dropped to $67.22 per barrel but improved by 0.6% to $68.7 by 4:18 AM CDMX.
- West Texas Intermediate (WTI) in the US rose 4 cents to $67.04, from a previous low of $65.4.
Expert Opinions
“For now, the oil market remains tight, suggesting it can absorb additional barrels,” said Giovanni Staunovo, an analyst at UBS.
Key Questions and Answers
- What is OPEC+ and why is its decision important? OPEC+, consisting of the Organization of Petroleum Exporting Countries (OPEC) and its allies, agreed to increase oil production. This decision is crucial as it will reintroduce almost 80% of the voluntary cuts from eight OPEC producers, impacting global oil supply and prices.
- How has the production increase affected oil prices? Despite the OPEC+ decision to raise production, oil prices have risen. This is partly due to a tight market and confidence in oil demand, as demonstrated by Saudi Arabia’s price increase for its light crude.
- What are investors’ concerns regarding US tariffs? Investors worry that higher tariffs could slow economic activity and, consequently, reduce oil demand.
