Algeria did not initially support a pause in oil production hikes ahead of the latest OPEC+ meeting, according to a report by Argus Media citing a senior source in the alliance. This contrasted with positions taken by Russia and Oman, both non-OPEC producers, who had favored a pause in monthly production increases.
The production hikes are part of a plan adopted by OPEC+—an alliance of OPEC and non-OPEC producers—since 2022. While Russia and Oman requested a pause, Algeria focused on concerns about certain members failing to meet their production quotas and compensation requirements, the source told Argus.
Despite its initial stance, Algeria ultimately agreed to a production increase of 411,000 barrels per day (bpd) for July. Russia and Oman, who first called for a pause, also supported the group decision.
On Saturday, key producers including Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman confirmed plans to increase oil output in July by 411,000 bpd. They cited strong market conditions and a stable global economic outlook as the reason behind the move.
Contrary to earlier media reports, the group never discussed a larger increase for July, according to the OPEC+ source.
Oil prices surged by 4% early Monday following the announcement. The market reaction came as the group avoided a bigger production boost, leading to a wave of short covering by investors who had bet on lower prices.
Saxo Bank analysts noted that hedge funds had been holding one of the largest short positions in WTI and Brent crude futures in five years. The sudden shift in sentiment pushed prices higher.
Analysts at ING, including Warren Patterson and Ewa Manthey, said global oil markets remain tight. They expect demand to rise further during the summer. This could help support prices in the near term.
However, ING warned that the market may move into surplus in the fourth quarter, which could lead to renewed downward pressure on oil prices later in the year.
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