Oil Prices Rise as OPEC Considers Production Changes: What It Means for You?

Oil prices are rising as OPEC considers production changes. Learn how this affects you and the global market.

Jun 6, 2024 - 11:29
Jun 6, 2024 - 11:31
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Oil Prices Rise as OPEC Considers Production Changes: What It Means for You?
Oil Prices Rise as OPEC Considers Production Changes: What It Means for You

Oil prices increased for a second day in a row as Saudi Arabia's energy minister hinted that OPEC+ might change its production plans. West Texas Intermediate (WTI) traded above $74 per barrel, bouncing back from the four-month lows seen earlier this week. This dip followed OPEC+'s decision to start adding more oil to the market by October. Despite concerns, ministers emphasized they could pause or reverse these changes if needed.

Reasons for the Increase

Technical factors also played a role in the price rise. Recent selling pushed both Brent and WTI into oversold territory, indicating that the market's reaction was too extreme.

Earlier in the week, Brent dropped below $80 for the first time since February after the OPEC+ meeting. This decision to increase production comes amid worries about demand and ample supplies from sources outside the group. The perception that geopolitical risks to crude supplies are decreasing has also contributed to the price drops.

According to Bjarne Schieldrop, chief commodities analyst at SEB AB, "It is now increasingly clear that there is a limit to how far OPEC+ is willing to go, how much volume it is willing to shed before ‘enough is enough’." Consequently, the oil market is becoming more sensitive to growth in both global demand and non-OPEC+ production, particularly US shale.

Signs of a Weak Market

In a potentially concerning sign, Saudi Aramco lowered prices for all its oil to Asia next month, the first reduction since February. Additionally, Wednesday’s EIA data showed an increase in weekly commercial crude inventories in the US.

Also Read: Oil Prices Steady as OPEC+ Plans Production Increase

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