Higher Output From Top Producers Send Oil Prices Lower

Crude oil prices in Asia on Monday declined following an announcement from oil producing countries such as the United States, Russia, and Saudi Arabia that they intend to increase their crude oil output. The following countries are currently three of the world’s biggest crude producing countries. Two of which have worked together since the past year in avoiding a global crude oversupply as well as help push oil prices to more normal levels not seen in years.

The collective efforts of OPEC members as well as Russia’s participation have helped oil prices recover above $50 and $60 per barrel since late last year pushing close to $70 per barrel during the beginning of the year after an announcement from the OPEC that organization would extend their agreement to continue cutting output by another nine months until the end of the year. Currently, the group has an agreement of cutting around 1.8 million barrels per day.

Despite this, the sudden and ongoing rise of crude oil production and inventories in the United States have offset the recovery of oil prices late last year up until the past couple of months. The up and down movement of crude oil inventories in the United States have slightly offset the efforts of the OPEC.

Until recently, repeated threats from the U.S. President Donald Trump regarding withdrawing or pulling out of a nuclear deal with Iran helped push oil prices higher close to $80 per barrel which is the highest oil price level seen since last November 2014. Trump’s confirmation of pulling out of the deal bringing back heavy sanctions against Iran in exchange for decreased nuclear activity sent oil prices at around $80 per barrel since the past couple of weeks.

Recent Oil Price Decline

The WTI crude oil futures for July delivery traded below $66.17 per barrel which represents a decline of more than 2% while Brent crude oil futures for July delivery traded 2.11% lower at $74.86 per barrel.

In Asia, the Shanghai Crude Oil WTI futures edged almost 5% lower at 457.20 yuan or $71.89 per barrel.

While the Brent was seen trading above $80 per barrel earlier this month, investors have also raised their concern in the possible effect of incredibly bullish crude oil prices on the global market as well as the global economy.

Oil prices were mostly down during Monday’s session following the announcement. Russia in particular have previously spoken on its intention to avoid an oversupply. However, the country’s recent eagerness in increase production was a result of seeing the need to balance the oil market this coming June.

In the United States, an additional 15 rigs were added for the week that ended in May 25 pushing total rig count to 859 which is the highest seen since 2015 signalling further rise in the U.S. crude production. The United States is now close to Russia’s output of 11 million barrels per day.

Further growth in the production of these countries may lead to oil prices slipping further back below the $50 per barrel level not seen since last year.

See also: U.S. Sanctions Against Iran Push Oil Prices Above $70

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