Brent crude below $70 amid OPEC+ disagreement

4:14 PM May 30, 2023

Brent crude is losing 4% today, which can be linked to several factors. The US media is talking about uncertainty regarding the debt ceiling agreement, as several Republicans have made it clear that they will not support the bill. In addition, there are increasing question marks over China and further demand growth.

Nonetheless, the key factor that is likely to support price declines at this point is the disagreement within the enlarged OPEC+ cartel. Recently, Saudi Arabia's oil minister warned contract sellers about the possibility of OPEC+ action, which could suggest another potential production cut. On the other hand, Russia's energy minister says Russia is happy with the current course of events and prices. However, there have been signs that Russia may also be producing and exporting more than the internal arrangements in the cartel. This threatens a potential 'break-up' of the entire agreement, which could lead to a return of supply of as much as 2 million barrels per day, although of course one has to bear in mind the limited capacity for such a rapid increase in production. Nevertheless, recently, Iraq or the UAE were said to have hinted that they would like to produce more. 

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Strong declines in Brent crude were triggered by uncertainty about the sustainability of the OPEC+ agreement and uncertainty about demand from China or globally if the US were to eventually go bankrupt. The nearest support is around USD 68 per barrel, where the 23.6 retracement is located. Source: xStation5


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