Energy
Tuesday, June 4th, 2024 4:27 pm EDT
Key Points
• OPEC+, a group led by Saudi Arabia and Russia, announced a plan to increase oil production starting in October, causing oil prices to fall nearly 2% on Tuesday. This wipes out most of the gains for oil prices so far this year.
• The production increase by OPEC+ is expected to start in the fourth quarter of 2024 and will gradually phase out 2.2 million barrels per day of production cuts.
• Analysts believe this is positive for consumers (potentially lower gas prices) but negative for oil producers (lower profits). The impact on oil prices might be limited by summer gasoline demand and the overall health of the global economy.
Oil prices continued their downward trend on Tuesday, falling nearly 2% and erasing most of their gains for the year. This decline follows five consecutive sessions of losses, triggered by the recent announcement from OPEC+, a group of major oil-producing countries led by Saudi Arabia and Russia.
OPEC+ surprised the market by revealing a plan to gradually increase oil production starting in October. This move aims to phase out 2.2 million barrels per day (bpd) of production cuts implemented in response to the pandemic. As a result, the global oil supply is expected to rise in the fourth quarter of 2024.
The market reaction was swift and negative. Analysts like Tamas Varga from PVM see this as a positive development for consumers, who will benefit from potentially lower prices at the pump. However, it’s a significant blow for oil producers who will see their profits decline.
Varga believes the downside for oil prices might be limited if summer gasoline demand remains strong. Additionally, the recent oil price drop could contribute to easing global inflationary pressures.
Another factor potentially affecting the oil market is the recent report indicating a contraction in the U.S. manufacturing sector, which could signal concerns about economic growth and lower energy demand.
Overall, the decision by OPEC+ to increase oil production has significantly impacted oil prices. With most of the year’s gains erased, the future trajectory of oil prices will depend on factors like summer gasoline demand and the overall health of the global economy.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/06/04/crude-oil-prices-today.html
