Crude oil prices fell as OPEC considers increasing production for the third month in a row

Global oil markets on Thursday witnessed a noticeable decline in prices, as benchmark Brent crude fell by 1.3% to 63.50 dollars per barrel, while US West Texas Intermediate crude fell by 1.2% to 60.50 dollars per barrel.

The decline comes amid reports that the OPEC alliance is considering increasing production for the third month in a row, which raised investors ' fears of an imbalance between global supply and demand.

Accelerated productivity growth threatens market stability

OPEC is preparing for its meeting scheduled for the first of June, where it is expected to discuss an increase in production by 411 thousand barrels per day for July, Bloomberg reports. This increase represents three times the amount initially planned, reflecting a strategic orientation to compensate for the previous cuts imposed by the group since 2022. This decision is expected to raise the cumulative total of increases since April to 960 thousand barrels per day, which is equivalent to 44% of the original cuts of 2.2 million barrels per day.

Surprising US stocks boost fears

Downward pressure on prices worsened after data from the US Energy Information Administration showed an unexpected rise in crude oil and fuel inventories last week.

Inventories recorded an increase of 1.3 million barrels, bringing the total to 443.2 million barrels, while analysts were expecting a decrease of the same magnitude.

Global demand challenges and geopolitical factors

The oil markets are currently facing multiple challenges, most notably:

Slowing economic growth:

due to trade tensions between the United States and China, which may affect global energy consumption.

Iran nuclear negotiations:

talks between Washington and Tehran are scheduled to resume next week, and any progress in these negotiations could open the door to an increase in Iranian exports, adding more supply to the market.

Tensions in the Middle East are escalating:

with reports that Israel is preparing to strike Iranian nuclear facilities, which, if realized, could disrupt supplies.

On the other hand, analysts warned that the continued increase in production could push prices to lower levels, especially if supply significantly exceeds demand.

Investment banks such as Barclays and ING bank forecasts oil prices, expecting the price of Brent to range between 55 and 65 dollars per barrel during the current year.

In contrast, producing countries, especially those that rely on oil revenues to finance their budgets (such as Saudi Arabia and Iraq), are facing significant financial pressures.

While Saudi Arabia needs a price of 90 dollars per barrel to achieve financial balance, Iraq needs more than 100 dollars, which makes the current prices insufficient to fill the deficit.

In the end, the market is now between the hammer of supply and the anvil of demand, as the OPEC meeting approaches, the markets remain in a state of cautious anticipation, while the group seeks to strengthen its market share and counter US shale production, any unaccounted increase may push prices further down, threatening the stability of oil economies. At the same time, global geopolitical and economic factors remain decisive elements in determining the course of black gold over the coming weeks.