OPEC+ is implementing another aggressive increase in supply. Effective in June, this increase solidifies a change in politics. With the prospects for higher offer increases in the coming months, we have reviewed our oil forecasts, says Warren Patterson, an expert in ING commodities.
Saudis may have to cut expenses and/or access debt markets
“The Saudis are the driving force behind the increases of supply greater than those scheduled to punish the members who have produced repeatedly above their objectives. The OPEC+ surprised the market in April with an increase in supply of 411k b/d for May, above the scheduled increase of 135k b/d. This past weekend, the group decided to opt for an equally aggressive offer increase for June.”
“Originally, OPEC+ would be supposed to bring 2.2Mb/d of offer back for a period of 18 months, which would run until September 2026. However, in three months, the group has decided to bring almost 1m b/d offer. The oil market has been dealing with a significant uncertainty in demand in the middle of tariff risks. This change in the policy of the OPEP+ adds uncertainty of the offer.
“The key to knowing how far the Saudis will lead what begins to look like a price war is the country’s low prices over time. Saudi need around $ 90/BBL to balance their fiscal budget, quite above the current prices. Saudi Arabia can reduce their fiscal equilibrium level by pumping more. Obviously, this also depends on how low the prices are also negotiated of the offer.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
