Brent plunges after OPEC+ expedites supply boost plan

The front-month ICE Brent contract has declined by $2.51/bbl on the day from Friday, to trade at $68.80/bbl at 09.00 GMT.

IMAGE: Oil storage tanks. Getty Images

Upward pressure:

Brent crude’s price has found some support amid ongoing tensions between the US and countries continuing to purchase Russian oil.

So far, the US administration led by Donald Trump has threatened penalties on India for purchasing Russian crude.

“This puts in the region of 1.7m b/d [1.7 million b/d] of supply at risk if Indian refiners stop buying Russian oil,” said two analysts from ING Bank.

If there are no countries willing to purchase Russian oil, it would remove the expected oil surplus in this year and 2026, the analysts remarked.

While the Trump administration has so far threatened penalties against India, it has remained relatively quiet on the continued flow of Russian oil to China.

“If the US successfully targets these flows [into China] as well, it will leave the market considerably tighter and require OPEC+ to tap even deeper into its spare production capacity,” the two analysts added.

Downward pressure:

Brent’s price has declined over the weekend after the OPEC+ group of oil producers agreed on another large supply hike for September.

Eight members of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) have agreed to collectively increase their supply by 547,000 b/d in September, accelerating the group’s plan to boost crude production.

“There was little in the way of surprises from OPEC+ over the weekend,” said ING Bank’s analysts.

The group’s de-facto leader, Saudi Arabia, is now slated to produce around 9.98 million b/d in September, while Russia will produce 9.45 million b/d.

“The market had largely expected the supply hike,” the two analysts added.

By Aparupa Mazumder

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