Oil prices to drop as OPEC+ hiking production in June

VIENNA: Eight OPEC+ member countries on Saturday announced a sharp increase in oil production for the month of June at the risk of driving down already very low prices.

Saudi Arabia, along with Russia and six other members of the oil cartel, will implement a production adjustment of 411,000 barrels a day out of the ground, as in May, according to a OPEC+ statement, whereas the initial plan called for an increase of just 137,000 barrels.

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Numbering a total of 22 countries, most of which are highly dependent on oil, the group had until recently been exploiting supply scarcity to boost prices, holding millions of barrels in reserve.

“OPEC+ has just thrown a bombshell to the oil market,” Jorge Leon, analyst with Rystad Energy, told AFP.

“Last month’s decision was a wake up call. Today’s decision is a definitive message that the Saudi led group is changing strategy and pursuing market share after years of cutting production,” he added.

That about-face will also provide an opportunity to build good relations with Donald Trump’s United States, he went on.

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Shortly after taking office in January Trump called on Saudi Arabia, which heads the cartel, to up production in order to bring prices down.

Last month the group slightly lowered its forecast for oil demand growth, citing the impact of US tariffs on the world economy.

The Organization of the Petroleum Exporting Countries in 2016 came up with OPEC+ to strengthen their weight on the global market.

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The eight who have agreed additional increases are Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman.