Saudi Aramco cut the price of its main oil grade to buyers in Asia after OPEC+ continued with its outsized output increases for a third month.
The Saudis led the producer group over the weekend in agreeing to raise production by 411,000 barrels a day in July, a third straight month of outsized hikes. In tandem with US President Donald Trump’s trade war, the supply increases have helped drive benchmark oil prices about 12% lower in London since early April.
There have been two significant OPEC+ decisions in the past week, analysts at Standard Chartered Bank, including the bank’s commodities research head Paul Horsnell, said in a report sent to Rigzone late Tuesday by the Standard Chartered team.
It is highly unlikely that anyone with even a modicum of intelligence has lost money in the past ten years or so by trading against the predictable thinking of those in charge of Saudi Arabia’s oil policy. Quite the reverse, in fact, with enormous profits available from the failures of the enormously well-flagged and exceptionally predictable strategy of the 2014-2016 and 2020 Oil Price Wars — launched by the Kingdom with the intention of destroying or disabling the U.S. shale oil sector, as analysed in full in my latest book on the new global oil market order. As OPEC members and their toxic companion in the OPEC+ formation, Russia, mull keeping oil production on the high side of recent historical averages, the key question for the oil markets is — surely they are not going to launch another oil price war using the same strategy as failed twice before?
West Texas Intermediate gained 2.8% to settle near $63 a barrel after the Organization of the Petroleum Exporting Countries and its allies agreed on Saturday to add 411,000 bpd of supply in July though some members objected, including Russia. With a handful of countries lobbying for a pause in July, banks are now split on how many more hikes will come in subsequent months.
A turbulent week for global energy markets saw oil prices slide amid OPEC+ uncertainty and escalating U.S.-China tensions.
The eight OPEC+ nations that contributed to voluntary production cuts are set to meet on Friday to discuss production strategy for July. Commodity strategists at Standard Chartered have predicted that we are likely to see more of the same, with the group adding another 411 thousand barrels per day to July targets and cumulative unwinding now clocking in at 1.4 mb/d.
Crude oil prices are set for another weekly decline following news that OPEC+ was planning to boost production by another 411,000 barrels daily in July. Meanwhile, a court ruling that blocked Trump’s tariffs has been paused after the White House appealed the decision.
It was these nations that shattered market expectations on April 3, when they announced their first super-sized hike — triple the volume originally scheduled. The shock move, unveiled just hours after President Donald Trump launched a global trade war, helped send crude futures to a four-year low below $60 a barrel in the ensuing days, marking a rupture with years of efforts by the coalition to try to shore up prices.
Despite the market’s hand-wringing, OPEC+ appears determined to stick with its roadmap to gradually restore output that was cut during the COVID-era slump. The unwinding plan has been telegraphed for months, and reversing course now could risk credibility—something the group has worked hard to reestablish.
“Crude oil edged lower as the market contemplated the outlook for rising OPEC supply,” ANZ analysts said earlier today in a note, as quoted by Reuters. On the other hand, ING analysts noted President Trump’s concession to the EU, which delayed the entry into effect of 50% tariffs to early July in case the two failed to seal a new trade deal. Also on the bullish side, President Trump threatened Russia with more sanctions after intensified strikes on Ukraine that followed a large-scale Ukrainian attack on Russian territory.