OPEC+ is set to start increasing oil supply to the market starting in April and will add about 120,000 barrels per day. This move has already caused prices to drop by $3 a barrel, reaching their lowest point in the past three years, even though there are no signs of tightening supply in the oil markets. The markets are nervous about the upcoming tariffs on various countries imposed by the U.S. administration, which are likely to lead to a slowdown in global economic activity. The market is reacting to the U.S. demand for oil producers to lower prices, and it seems that this is on track, contributing to the drop in oil prices towards $67 a barrel.

Kamel Al-Harami

The decision by OPEC+ to release more oil into the market may have additional motivations and consequences. It could be a strategic move to discourage non-OPEC producers from increasing their crude oil output. This could be a sign that OPEC+ is fed up with continuously curtailing and reducing its vast spare crude capacity, while other producers continue to increase their production and compete in the market, all while benefiting from the stability OPEC+ decisions provide to protect their investments. At the expense of reducing its own production and price protection, the time has perhaps come for the oil organization to be firm and sacrifice its crude oil throughput in the interest of a long-term OPEC+ strategy.

This calls for oil price stability and the security of supply for global consumers. The question is: Will the organization continue to release more oil into the market, up to 2.2 million barrels over the next 18 months, regardless of how low oil prices may fall? The hope is that oil prices will not decline further, but if they do, will OPEC+ continue to increase supply, or will it pause to protect its own budget deficits and avoid exacerbating them further?

By Kamel Al-Harami Independent Oil Analyst
email: [email protected]