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Oil prices slid more than 2 per cent on Wednesday as traders weighed the possibility that Opec+ will accelerate production increases in June amid continued tensions between key members of the cartel.
Eight Opec+ members, including Saudi Arabia and Russia, surprised the market in early April by announcing plans to boost headline oil output in May by 411,000 barrels a day, up from a previously targeted increase of 122,000 b/d.
When the members meet on May 5 to set output targets for June, Saudi Arabia was likely to push the group to increase headline production by a similar amount, two people familiar with the kingdom’s thinking said, adding that no final decision had been taken.
Brent crude, the international benchmark, was down 2.4 per cent on Wednesday afternoon in London, while WTI, the US marker, was 2.7 per cent lower.
Opec+ members have been holding back production for the past three years, cutting their combined output by almost 6mn b/d in a bid to push crude prices higher. Those efforts helped to keep crude above $90 a barrel for most of 2022, but the cuts have become less effective over time because of weak demand growth and increased oil output elsewhere.
In response, the Saudi Arabia-led group began unwinding some of the cuts from this month. The decision has followed a period of increased tension between Saudi Arabia, which has shouldered the biggest share of the cuts, and other members, such as Kazakhstan, Iraq and the United Arab Emirates, which have pumped above their quotas.
Opec published a new plan last week for several members to compensate for past overproduction through additional cuts in the future, but traders remain sceptical over the extent to which countries will comply.
Kazakhstan’s energy minister on Wednesday said it would try to adjust its output in line with the Opec+ plans but that it had to act in its own “national interests”, adding that the country had limited control over the international oil companies that dominate its oil production.
“We will try to adjust our actions,” Erlan Akkenzhenov told Reuters. “If our partners . . . are not satisfied with the adjustment of our actions, then again we will act in accordance with national interests with all the ensuing consequences.”
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The energy ministries of Kazakhstan and Saudi Arabia did not immediately respond to requests for comment.
Reuters also reported earlier on Wednesday that some Opec+ members wanted to increase headline output in June by a similar volume to that agreed for May, citing people familiar with the matter.
The prospect of increased oil supply from Opec+ comes as US President Donald Trump’s tariffs threaten to throttle global trade, hitting global growth.
The International Energy Agency has cut its expectations for oil demand growth this year by about a third from 1.03mn barrels a day to 730,000 b/d and signalled that further downward revisions were possible depending on how the US president’s tariff programme evolved.
