Oil prices dipped on Monday morning, following reports that the OPEC+ alliance of oil producing nations could agree to pump more crude.
On Saturday (11 July), the Wall Street Journal reported that OPEC and its allies including Russia will face a push to ease oil production cuts introduced in April. The Journal, citing sources, said Saudi Arabia was leading a push within the organisation to increase production.
Saudi Arabia wants to increase oil production by 2 million barrels per day, according to the report. OPEC+ members will meet virtually on Wednesday (15 July) to discuss policy.
“The hope is that the cartel will not open the taps up straight away but the decision of increasing the supply will be done in a more gradual manner,” said Naeem Aslam, chief market analyst at Avatrade.
The OPEC+ alliance agreed to cut oil production by a record 9.7 million barrels per day in April in response to the COVID-19 pandemic, which dealt a huge blow to demand for oil and sent prices diving. US oil futures turned negative in April and Brent fell to 18-year lows.
However, demand has begun to recover as lockdowns has eased around the world. The International Energy Agency said on Friday in its closely watched quarterly oil market report that the worst damage to oil demand appeared to be over. However, the agency cautioned that new COVID-19 flare ups in Latin America and the US added more uncertainty to the outlook.
Slumping demand for oil has proved hugely costly for Saudi Arabia, which largely depends on oil to fund its state. The country raised taxes and cut public spending in May, partially blaming the collapse in oil prices.