The cartel says it is rolling back some production cuts
For years American oil producers have been ramping up production thanks to supplies from the Permian Basin in the western U.S. That additional supply has made it harder for the Organization of Petroleum Exporting Countries (OPEC) to sway markets through output cuts. The collective American quest for market share, among other factors, has kept crude prices low. Now, OPEC is letting some members roll back previously announced production cuts.
At a recent meeting of OPEC countries and some aligned states, the so-called OPEC+ bloc, the cartel decided that its 1.65 million barrel-per-day cuts announced in April 2023 would continue through 2025. But additional cuts volunteered by eight countries — among them Saudi Arabia and Russia — will be allowed to be phased out starting in October. Bloomberg reports that the rollback came earlier than expected. Oil futures are down about 5% since May 31.
Although U.S. oversupply certainly didn’t help, other factors are also at play. Russia’s war with Ukraine has destabilized its export market because the European Union capped the price it would be willing to pay for crude from the country. Plus, China’s economic growth has been wobbly, and uncertainty about the world’s second-largest oil market has weighed on prices.
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