(New York) Oil prices recovered on Thursday, despite the decision of the Organization of the Petroleum Exporting Countries (OPEC) and their allies (OPEC+), to accelerate the increase in their total volume of production for July .
Posted at 3:13 p.m.
A barrel of Brent North Sea crude for August delivery rose 1.13% to $117.61.
A barrel of US West Texas Intermediate (WTI) for July delivery gained 1.39% to $116.87.
After months of wait-and-see attitude despite soaring prices, OPEC+ member countries have agreed to adjust July production “up by 648,000 barrels per day”, compared to the 432,000 barrels set for the months previous ones, according to a press release from the group.
“In just 11 minutes (of meeting), OPEC and its allies (OPEC+) agreed to end their production cuts more quickly,” comments Giovanni Staunovo, analyst at UBS.
“With many members of the group having reached their production capacity, the actual increases in production will be lower and the group’s spare capacity will continue to decline,” he notes.
For Jeffrey Halley, analyst for Oanda, the production increase of 648,000 barrels per day “over the next two months will not significantly alleviate the shortage of sanctioned Russian oil”.
This long-awaited acceleration in OPEC+ production is “partially good news, because it is less than the market expected”, while with this volume OPEC+ is far from compensating for the lack of crude coming from Russia, Libya and Angola, also pointed out Andy Lipow of Lipow Oil Associates.
The market also doubts, he explained, the ability of OPEC+ members to honor these new commitments when they are already struggling to produce more.
Crude prices logically fell on the announcement of the increased supply from OPEC+, but the improvement did not last when the evolution of American oil stocks was announced.
These reserves fell much more than expected last week: by 5.1 million barrels without counting some other 5.4 million barrels drawn by the administration from the strategic reserves.
This “very unexpected” decision by OPEC+ could also mark a change of course for the alliance, according to Ipek Ozkardeskaya, of Swissquote bank.
The analyst sees it as “a sign that the ice between Saudi Arabia and the United States could finally melt after two years of icy relations”.
“If the United States could strengthen its ties with Saudi Arabia, it would pump more to compensate for Russian oil. This could further isolate Russia and change the course of the war,” she continues.