A further drop in oil prices could prompt OPEC+ to reverse cuts: Roth By Investing.com

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Investing.com — OPEC+’s recent announcement to begin easing production cuts later this year has been blamed for the recent turmoil in , but one analyst believes that if prices continue to decline or fall below current levels, the oil cartel could be forced to reverse or postpone its plan to phase in production cuts as early as August.

“We would not be surprised if OPEC+ decided to postpone the return to voluntary barrel cuts and announce this move as early as early August if oil prices remain around $70,” Roth MKM said in a statement on Tuesday note.

Earlier this week, OPEC+ announced it would extend its production cuts of 1.66 million barrels per day (mbpd) through 2025, adding that voluntary production cuts of 2.2 million barrels per day would continue for another three months until September, after which these reductions would take place. are being phased out.

Oil prices were down nearly 10% in the five trading sessions through Tuesday. Despite the recovery in oil prices on Wednesday, underlying sentiment remains fragile as oversupply concerns persist.

The recent negative price action may have caught the attention of OPEC+, Roth MKM said, although he warned that the unwinding of cuts due in the fourth quarter is “very much subject to change in the coming months if market conditions change.” justify.”

Falling oil prices are a big no-no for major oil producers, including Saudi Arabia and Russia, as the former needs an oil price “well above $90 per barrel to balance its budget,” Roth MKM adds, while the latter needs an even “higher oil price”. prize to finance the ongoing war in Ukraine”

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But the scope for a significant decline in oil prices is likely to be limited by seasonal summer demand, which will keep crude inventories in check.

“We think oil demand is likely to be quite healthy in the summer and global inventories are likely to decline between July and September, so we still have a positive outlook on oil prices in the summer months,” Roth MKM said.

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