Oil gave up some of last week’s gains on Monday as traders began to analyze how increased production could impact the markets. A clear target for output hasn’t been released, leaving traders to guess how many more barrels per day will actually be produced as of July 1. Over the weekend, OPEC and non-OPEC producers released a statement confirming that they would increase supply by returning to 100 percent compliance with their previous output cuts, an effort to counteract the underproduction that has been pressuring oil prices and global supply in recent months.
Since implementing its production cuts in 2017, OPEC and its partners have cut 1.8 million barrels per day of production to limit supply and keep prices up. Recently, however, geopolitical tensions in some oil-producing countries such as Venezuela and Angola has decreased supply to levels below OPEC’s target. A current outage at Canada’s Syncrude facility could add to the decline in July, with Reuters reporting up to a 360,000 barrel per day loss in July as a result of the outage. According to data released by Baker Hughes on Friday, the United States cut one oil rig last week, it’s first cut in three months. The move took the country’s total count to 862.
Traders are concerned, however, that the only country that can really increase output at this time is Saudi Arabia. If the Saudis are alone in their increased production, they could face outrage from other countries such as Iran whose OPEC governor Hossein Kazempour Ardebili already spoke against this possibility. For this reason, traders are questioning just how much of an increase will really happen once July comes.
Brent crude futures were down 1.80 percent as of 1:56 p.m. HK/SIN on Monday, to trade at $74.19 per barrel. U.S. WTI futures were down 0.32 percent to trade at $68.36 per barrel.