Background on OPEC+ and its Influence
The Oil prices fell on Tuesday as traders worried that the upcoming OPEC+ meeting and its allies on Wednesday might result in another increase in production from the cartel’s members.
Who is OPEC+?
OPEC+, an alliance of 22 oil-producing nations led by OPEC (Organization of the Petroleum Exporting Countries) and including other major producers like Russia, plays a crucial role in stabilizing global oil markets. The group coordinates production levels to influence prices and maintain market balance.
Market Reaction and Analyst Opinions
In London, the Brent crude oil benchmark for July delivery dropped by 1.00% to $64.09 per barrel.
Simultaneously, in New York, the West Texas Intermediate (WTI) benchmark for July delivery fell by 1.04% to close at $60.89 per barrel.
Market participants are closely watching OPEC+’s stance, as the 22-member group holds a virtual meeting on Wednesday to discuss their joint strategy. On Saturday, those who have made the largest cuts in recent years will gather again to try and boost prices.
Gregory Brew, an analyst at the US-based Eurasia Group, stated in a note that “OPEC+ should increase production by 411,000 barrels per day in July,” compared to the initially projected 137,000 barrels.
Fawad Razaqzada, an expert at City Index, added that “OPEC+, along with all global producers, is now expected to raise production,” according to market predictions.
Implications of Potential Production Increase
Razaqzada noted that “although much of this increase is already factored into current prices, oil barrels continue to accumulate, and uncertainty persists regarding demand growth.”
Key Questions and Answers
- What is OPEC+? OPEC+ is an alliance of 22 oil-producing nations, including OPEC members and other major producers like Russia. The group coordinates production levels to influence global oil prices and maintain market balance.
- Why are oil prices falling? Oil prices are dropping due to concerns that the upcoming OPEC+ meeting might result in increased production from cartel members, adding more supply to an already oversupplied market.
- What do analysts expect from OPEC+? Analysts predict that OPEC+ will increase production by 411,000 barrels per day in July, compared to the initially projected 137,000 barrels.
- How will increased production affect oil prices? While some of the expected increase is already reflected in current prices, continued accumulation of oil barrels and uncertainties surrounding demand growth may put downward pressure on prices.
