Oil Prices Surge as OPEC+ to Boost Oil Supply in July

UTC by Benjamin Godfrey · 3 min read
Oil Prices Surge as OPEC+ to Boost Oil Supply in July
Photo: Depositphotos

The fears of Iran increasing its oil production while the rest of the OPEC members’ steady production may offset the global oil pricing.

The Organization of Petroleum Exporting Countries (OPEC) and its global partners collectively called OPEC+ have agreed to step up crude production, a move that has stirred a boost in oil price. Per a CNBC report, the organization reinstated its April decision to boost production by 2.1 million barrels per day between May and July.

The OPEC+ meeting held on Tuesday has reignited a run in oil prices with the international benchmark, Brent crude futures trading at $71.17 a barrel on Tuesday, up around 2.7%. The West Texas Intermediate crude futures soared 3% to $68.65, the best price it has traded in the past 24 months.

The global oil industry received a massive shock back in 2020 when the coronavirus pandemic caused a major plunge in prices. The supply for oil products exceeded the demand and prices reacted accordingly. Major oil producers responded by cutting production, a move that has notably helped boost prices.

Oil Price Boost: Iran as a Major Concern

As members of the OPEC+ are looking to cushion the demand and supply to balance oil prices, a major concern rings the bell and it is Iran. There are fears of Iran increasing its oil production while the rest of the OPEC members’ steady production and it may offset the global oil pricing.

The Asian country is currently in talks with 6 world powers including the United States to revive its 2015 nuclear. A successful negotiation will see the lifting of sanctions and the demand for Iranian oil from these major countries and economies.

“It’s too early to give specific numbers around Iran,” said Jeffrey Currie global head of commodities research at Goldman Sachs, told CNBC’s “Street Signs Europe” on Tuesday. “So I think the best you can hope for in terms of how they are going to deal with Iran is the indication that they are willing to offset any increases in Iran. That could be the positive upside surprise coming out of this meeting.”

While the general perception is an offset in the balance of the system per Iran production boost, OPEC Secretary-General Mohammad Barkindo allayed these fears in a statement on Monday that Iran is an important member of the OPEC, ranking as one of the five founding members, thus positing that the country will not destabilize the existing structure.

“We anticipate that the expected return of Iranian production and exports to the global market will occur in an orderly and transparent fashion, thereby maintaining the relative stability that we have worked hard to achieve since April of last year,” he added.

The fear, though legitimate may be over flogged, as analysts at the Eurasia Group believe any wrong move from Iran can also affect its own interests, however, OPEC+ may need to make adjustments in the coming month.

“Over the medium term, OPEC+ will most likely adjust its policy to prevent the addition of Iranian barrels from derailing its market balancing strategy,” they said in a research note. “Saudi Arabia will likely lean on Russia to better understand the scope of Iranian policy to work on adjustment plans. Iran would also probably act constructively as higher oil prices serve its own interests.”

Commodities & Futures, Market News, News
Benjamin Godfrey

Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.

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