The eight OPEC+ countries with voluntary production cuts surprisingly announced yesterday that they would increase production by 411 thousand barrels per day in May. That is three times as much as was actually planned. In fact, the production increases planned for June and July were brought forward to May, Commerzbank's commodity analyst Carsten Fritsch notes.
Kazakhstan has to reduce production
"In the press release, OPEC+ cites the continued healthy fundamentals and the positive market outlook as reasons for the move, which sounds odd given the sharp fall in prices yesterday. On the back of the announcement, oil prices extended their losses. It is possible that the decision was made before US President Trump sent oil prices plummeting with his tariff announcements."
"In this case, the previous price rise to $75 could have been misleading, as this was mainly due to the risk of sanctions. It is also possible that the decision was made out of anger at the record high oil production in Kazakhstan. This is because the press release also referred to the compensatory cuts to be made, which would now be carried out more easily."
"As a result, unlike the other countries, Kazakhstan is not allowed to increase production any further, but has to reduce it. The oversupply on the oil market is now likely to be larger in the second quarter, which speaks in favour of a lower oil price."
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