OPEC+ is considering a third straight monthly output hike, departing from the norm of stabilizing oil markets. According to Bloomberg, the group of 12 major oil-exporting nations, including Saudi Arabia, UAE, and others, is considering a July increase of 411,000 barrels per day (bpd)—roughly triple the previously planned amount. This would mirror supply increases in May and June. Such an increase in July could lead to a breakdown in Brent crude’s $60-per-barrel price floor (as long as the war risk premium remains suppressed).
Brent fell to $63 a barrel, down about 1.7% following the news. West Texas Intermediate dropped to around $60 a barrel.
According to delegates, the increase would mark the third consecutive month of added supply, though they noted that no final agreement had been reached.
Bloomberg provided more color about the strategy at play with OPEC+ that would only increase concerns about a global glut:
The strategy appears aimed at disciplining quota violators by pushing prices lower. But it will add to the overall picture of oversupply — not only is there a chance of more Iranian barrels hitting the market, energy demand globally looks set to soften.
“We’re seeing the market reacting to evidence that OPEC is letting go of a strategy to defend price in favour of market share,” said Harry Tchiliguirian at Onyx Capital Group, adding, “It’s a bit like taking off a Band-Aid; you do it in one fell swoop.”
