Brent drops on prospect of new OPEC+ production hike
The front-month ICE Brent contract has moved $1.84/bbl lower on the day, to trade at $67.02/bbl at 09.00 GMT.
IMAGE: Oil pumpjacks. Getty Images
Upward pressure:
Brent crude has found some support from geopolitical risks that could cut oil supply from the market.
Washington has imposed sanctions on several shipping companies and vessels earlier this week for allegedly smuggling Iranian oil disguised as Iraqi oil.
By tightening sanctions, the US administration aims to drive the OPEC producer’s oil exports to zero. “Geopolitics laces through the crude market,” remarked SPI Asset Management managing partner Stephen Innes.
Besides, US President Donald Trump is considering phase two and phase three sanctions on Russia, as Moscow fails to reach a ceasefire deal with Kyiv, Bloomberg reports.
The development comes as the US imposes 50% tariffs on Indian imports in retaliation for New Delhi’s continued purchases of Russian oil.
“Washington’s campaign to stifle Russia’s oil lifeline is intensifying, with Trump teasing “phase two” and “phase three” sanctions after penalizing India for lifting Moscow’s barrels,” Innes said.
Downward pressure:
Brent’s price has plunged following reports that the OPEC+ ministers, due to meet on Sunday, may consider further increases in production targets.
The Saudi Arabia-led group is expected to consider another output hike, Reuters reports, citing two sources familiar with the matter.
“OPEC+ is floating the idea of production hikes at this weekend’s meeting,” according to Innes.
The global oil market faces the risk of oversupply as the Vienna-headquartered group has unwound 2.2 million b/d of voluntary production cuts over the past six months, at a quicker pace than initially scheduled.
“[The] move that feels counterintuitive until you remember the cartel’s long game: clawing back market share from non-aligned producers who’ve been pumping flat-out,” Innes added.
By Aparupa Mazumder
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