This weekend, OPEC+ may debate boosting oil production in July by more than the 411,000-bpd monthly hikes it has announced for May and June, sources with knowledge of the discussions at the production group told Reuters on Friday.
For two months now, OPEC+ has been pursuing a policy to unwind the production cuts by monthly volumes triple that of the original plans, and the eight countries doing the cuts have decided to boost May and June oil production by 411,000 barrels per day in each of the two months.
The new OPEC+ strategy – largely considered to be in response to overproducing members such as Kazakhstan – has sunk oil prices in recent months, alongside the chaotic U.S. trade policy that has heightened economic uncertainties.
The latest OPEC+ production policies suggest that top OPEC producer Saudi Arabia is willing to endure a short-term pain with lower oil prices to punish the overproducers in the OPEC+ deal and to start spoiling the shale party in the United States.
The base-case scenario for the July production hike is another 411,000 bpd increase.
However, angered by Kazakhstan’s defiance, the other OPEC+ members could discuss an even larger production increase, according to Reuters’ anonymous sources.
Kazakhstan cannot reduce its oil production as it has no right to impose output reductions on international firms that are operating more than 70% of Kazakhstan’s oilfields, Energy Minister Yerlan Akkenzhenov told Bloomberg on Thursday.
Separately, Kazakhstan’s Deputy Energy Minister Alibek Zhamauov told Interfax that the country has already notified OPEC it would not cut its oil production.
“No, no, we won’t be revising [the compensation schedule], we have already told OPEC that we are not going to cut output and will be producing according to our capacity,” the Russian news agency quoted Zhamauov as saying on Thursday.
Early on Friday, oil prices were headed to another weekly decline amid expectations that OPEC+ would announce this weekend another large production increase for July.
By Charles Kennedy for Oilprice.com
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