The price of a barrel of Brent crude temporarily traded at just over $80, close to the perceived ‘pain threshold’ of the OPEC+ production cartel: At this price level, the cartel had decided in the past to cut production in order to stabilise the market, Commerzbank’s commodity analyst Barbara Lambrecht notes.
Oil supply remains tight
“On the first of August, the Joint Ministerial Monitoring Committee of OPEC+ will meet which is to review every two months whether the cartel’s current production strategy is still appropriate. This would provide an opportunity to prepare for adjustments. However, Reuters reported last week that informed sources believe this is unlikely.”
“The fact that the market is currently undersupplied also speaks against a change in production policy. US crude oil inventories have fallen for the fourth week in a row. In addition, the survey-based OPEC production estimates due in the coming week should confirm that supply remains tight, at least from this side.”
“However, if prices continue to fall because demand concerns become a sustained negative factor, the major producers Saudi Arabia and Russia could well agree in the short term and cancel the gradual withdrawal of voluntary cuts planned from October onwards.”
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