01 June 2018, Naija247news, Lagos – Oil price fell by 3 percent following a recent report that the Organisation of the Petroleum Exporting Countries, OPEC, will increase production by 1 million barrels per day.
The price of Brent crude fell by 3 percent to around $77 a barrel on Thursday compared to 2014 highs of above $80 a barrel just a week ago.
Both Russia and Saudi Arabia’s energy ministers, Alexander Novak, and Khald Al-Falih had on Friday, told newsmen at the St. Petersburg International Economic Forum in Russia, that OPEC will resume output increase at the third quarter of this year if approved by members at the next meeting holding from June22-23rd.
OPEC and its partners in a Declaration of Cooperation, DoC, in January last year decided to cut crude oil production output by 1.8 million barrels per day.
The agreement has since been extended twice.
However, as a result of increase in oil prices, strains have now been put on the global economy, drawing political heat from major consumers, notably the U.S.
“I think in the near future there will be time to release supply” smoothly to avoid shocking the market, Al-Falih said at the St. Petersburg International Economic Forum in Russia. When OPEC, Russia and other major producers meet in June “we will do what is necessary” to reassure consumers, the minister said.
OPEC members, especially Saudi Arabia, and OPEC’s partners have been cutting more than intended under the agreement partly because of unplanned losses in Venezuela and Angola.
If output is increased, it would add just 300,000 barrels a day to the market, while an equal increase by Russia would add more 700,000 to 800,000 barrels a day, according to Bloomberg estimation.
Excess cuts amounted to about 740,000 barrels a day in April, according to estimates from the International Energy Agency.
Whether the size of the supply increase is ultimately “a million, more, or less, we’ll have to wait until June,” when OPEC and its partners will meet, Al-Falih said.
Novak had echoed this, saying “it’s too early now to talk about some specific figure, we need to calculate it thoroughly.”
In the past, oil prices close to or above $100 a barrel have brought significant political pressure from consumer countries.
U.S. President Donald Trump directed his ire against OPEC last month, saying in a tweet that “oil prices are artificially Very High! No good and will not be accepted!”
Last week, the International Energy Agency, IEA, also voiced its concern as high prices are beginning to affect demand.