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Oil prices fell Monday due to the renewed concerns of an excess global supply after an OPEC+ decision to announce a second increase in consecutive monthly production.
Brent Crude, the global reference point, fell more than 4 percent to less than $ 59 when the week began, testing the minimum of four years last week. The price of West Texas Intermediate, the American reference point, fell to about $ 56.
The merchants reacted to a decision on Saturday by eight members of the OPEC+, including Saudi and Russia Arabia, to increase the supply by 411,000 barrels per day in June. The measure occurred despite sliding prices caused by fear of excess supply and economic weakness linked to Donald Trump’s commercial war.
The oil sign surprised the market last month by announcing a leap in the production of the same size, more than three times more than expected. The combination of the increase in the offer of the OPEC and the fears that the commercial tariffs of the United States damage the global economy saw the price of Brent Crude in almost a fifth in April, the greatest monthly fall in almost three and a half years.
The OPEC+ movement to pump more oil to a market that falls marked a significant change of focus, said Jorge León, a former OPEC employee now in the Rystad energy consulting.
“The OPEC+ has just launched a bomb to the oil market,” he said, adding: “Last month’s decision was a call for attention. Today’s decision is a definitive message that the group led by Saudi is changing the strategy and pursues the market share after years of reducing production.”
During the last three years, the OPEC+ had reduced collective production by almost 6 mn B/d to reinforce prices, a strategy that initially kept raw above $ 90 per barrel in much of 2022. But its effectiveness has decreased amid warm demand, the increase in the production of the United States and the lax discipline of the members.
The tensions within the poster have grown, particularly with Kazakhstan, which has expanded the production of its tongue field directed by Chevron and indicated that it would prioritize the “national interests” over group quotas.
In response, Saudi Arabia has begun to relax production edges, pressing for this month’s increase.
The kingdom, which had reduced its own production by 2mn B/d in the last three years, has been frustrated more and more with the rise of most of the cuts, while other members, including Kazakhstan and Iraq, constantly pumped over their quotas.
Saudi officials now feel comfortable with the recovery offer even if they lead to a prolonged period of lower prices, according to people familiar with the thought of the kingdom. It is not clear why Saudi Arabia, which is struggling to balance its national budget due to the weakest prices of oil, has turned to the strategy, which probably leads to lower prices for the rest of this year.
Some analysts questioned how much oil would really reach the market. Bjarne Schieldrop, main analyst at Basic Products of SEB, said that OPEC+ production in April fell into 200,000 b
