Saudi Arabia and Russia have agreed to increase production but will need to negotiate over the specifics. This will end the current production cut deal. The reasoning behind an increase in production has been led by a string of political events. U.S. sanctions on Iran could remove 300k bpd from International markets. Venezuela’s oil industry has been crippled by election rigging where the U.S. may take further action and hyperinflation in the economy where production is now down by 50 per cent since its peak. Reports also suggest that there isn’t agreement from the rest of the OPEC and non-OPEC members. Several producers have also come out into the limelight to oppose adding more production back into the market. As this increase in production will come from only Saudi Arabia and Russia, others will not be able to increase production as they are producing as much as they are able to.
Going forward is still unclear. Is a more significant price correction due or has the sign of an increase in oil production already been priced in and this may be an opportunity to buy? With OPEC and Russia due to meet in June, this will provide traders forward guidance.
