OPEC has signaled it may decide to ease the oil production cuts it agreed to implement in late 2016 on the back of Venezuela’s catastrophic production decline and the pending U.S. sanctions against Iran, which combined to push Brent past the $80 mark for the first time in four years last week.
President Trump was the first to voice concern about too-high prices and, not long after, India’s oil minister followed with a complaint about unreasonably high prices. In response, Saudi Arabia said there was no fundamental reason for Brent to trade at $80 as there was sufficient supply to meet rising global demand.
Following this statement and reports that other OPEC members could be mulling over higher production, to be discussed at the next OPEC+ meeting in late June, oil prices began to slide down, helped by assurances from Europe, China, and India they will continue to buy Iranian crude despite U.S. sanctions.
This week, prices got additional pressure from a surprise build of 5.8 million barrels in U.S. crude oil inventories as estimated by the Energy Information Administration, as well as the latest weekly increase in production, to 10.725 million barrels daily.
While prices may fall in the immediate term, the longer-term outlook is still bullish because of the new emission standards that the International Maritime Organization will enforce from the start of 2020, which will see vessels switch to low-sulfur fuel. According to analysts, oil refiners…