OPEC+ could bring back 2.2 million barrels daily in supply by November this year in an apparent acceleration of the rollback of its production cuts, per a Reuters report citing unnamed sources from the cartel.
The source said that essentially Saudi Arabia has become fed up with quota laggards Iraq and Kazakhstan and was planning to tighten their screws by unleashing more barrels to undermine their oil revenues.
The report, which comes on the heels of OPEC+’s latest meeting, this Saturday, at which the group agreed to add another 411,000 bpd to combined production in June, after a hike of the same size for May. Reuters calculations put the total amount of supply to be brought back over the second quarter at 960,000 barrels daily, or 44% of the 2.2 million bpd cut.
“We continue to call this a ‘managed’ unwind of cuts and not a fight for market share”, UBS’s Giovanni Staunovo said, as quoted by Reuters.
“Compliance again appears to be the key focus, with Kazakhstan and Iraq continuing to miss their compensation targets, alongside Russia to a lesser extent,” RBC Capital Markets’ Helima Croft commented.
Meanwhile, the signals coming out of OPEC+ point to further rollbacks in the third quarter unless the laggards correct course and move to make amends, in the form of compensation cuts, one of the Reuters sources said.
On prices have unsurprisingly sunk further on the latest news from the OPEC+ camp, with Brent crude falling to some $59 per barrel at the time of writing, at West Texas Intermediate at $56.07 per barrel. Both benchmarks are down by over 3% from Friday’s close.
“The key to knowing how far the Saudis will take what is starting to look like a price war is the nation’s tolerance for low oil prices over time,” ING’s Warren Patterson said in a note earlier today, going on to forecast lower oil prices down the road as a surplus predicted for next year moves to this year because of the accelerated return of supply.
By Irina Slav for Oilprice.com
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