Background on Key Players and Context
The Organization of the Petroleum Exporting Countries (OPEC) increased crude production in May, but gains were limited by over-quota cuts from countries that previously exceeded their quotas. This situation has significantly impacted global oil prices, particularly Brent and West Texas Intermediate (WTI).
Brent, the international benchmark for crude oil, and WTI, the standard for US oil, have experienced notable fluctuations in recent months. The geopolitical tensions, such as the 12-day war between Israel and Iran’s nuclear facilities, have temporarily pushed prices above $80 per barrel before retreating to the current level of around $67.
US Crude Production and OPEC+ Developments
In April, US crude production reached a record high of 13.47 million barrels per day, up from 13.45 million barrels in March, according to data from the U.S. Energy Information Administration’s Petroleum Supply Monthly series.
John Kilduff, a partner at Again Capital, noted that the record US crude production contributed to the bearish sentiment in the market. Meanwhile, OPEC+ is expected to increase production by 411,000 barrels per day (bpd) in August following similar hikes in May, June, and July. This would result in a total OPEC+ supply increase of 1.78 million bpd year-to-date, equivalent to over 1.5% of global demand.
OPEC+ Dynamics and Market Tension
Despite the anticipated production increase, the market remains tense. OPEC+ will meet on July 6, but analysts like Giovanni Staunovo from UBS warn that the situation could remain volatile.
OPEC Compliance and Individual Country Performance
According to a Reuters survey, OPEC’s crude production increased in May; however, gains were constrained by countries exceeding their quotas. Saudi Arabia and the United Arab Emirates reported lower-than-allowed increases.
Kazakhstan, which has consistently exceeded OPEC+ quotas, might surpass its previous oil production forecast of around 2% this year due to improved output from its Caspian Sea fields, as calculated by Reuters using data from KazMunayGaz, the state energy company.
Market Outlook and Analyst Predictions
A survey among 40 economists and analysts in June predicted that Brent crude oil would average $67.86 per barrel in 2025, up from May’s forecast of $66.98. Meanwhile, WTI was expected to average $64.51 per barrel.
Key Questions and Answers
- Q: What factors have contributed to the recent decline in Brent crude oil prices?
A: The decline can be attributed to reduced geopolitical tensions in the Middle East, a potential increase in OPEC+ production starting August, and record US crude production.
- Q: How have individual OPEC members performed regarding their production quotas?
A: Some members, like Saudi Arabia and the UAE, have not fully utilized their allowed production increases. Meanwhile, Kazakhstan has consistently exceeded its quotas.
- Q: What are analysts predicting for oil prices in 2025?
A: According to a Reuters survey, analysts predict an average Brent price of $67.86 per barrel and WTI at $64.51 per barrel for 2025.
