Analysts at multinational financial services and investment bank, Goldman Sachs, have predicted OPEC+ will decide to raise production in July by another 411,000 barrels per day (bpd).
This surprising news means that the analysts will then expect further relaxations of its quotas to be paused.
At the time of writing, Brent Crude had been trading in the mid-$60s – lower than some countries, such as Saudi Arabia, would like – while West Texas Intermediate crude was trading at the lower end of the $60s. The July increase may also be reassessed depending on the economic data at the time.
The OPEC+ group surprised the markets earlier this month by agreeing to raise overall production by 411,000 bpd in June. Despite an initial drop in oil prices in reaction to the news, prices then rebounded. The realisation set in that the rise was merely legitimising chronic overproduction by Nigeria and Iraq, so the decision would make little difference to actual supply.
The OPEC+ group comprises many large and smaller oil-producing countries, with enough control over oil supply to influence market prices. It does not, however, include many oil-producing countries, most notably the US, which has become the world’s biggest oil producer. This means that companies like ExxonMobil, the maker of the Mobil Pegasus gas engine oil, are free to produce as much as they want.
The Goldman Sachs analysts’ predictions indicate that OPEC is becoming concerned about weakening oil demand. It has so far only phased out 44% of the 2.2 million voluntary production cuts.
