Price of Brent crude drops after OPEC strikes deal to increase production

Global oil price benchmark Brent crude has fallen by 1.7% to US$74.25 per barrel in this morning’s trading, as the market reacts to OPEC’s decision to increase oil output among its members.

The international oil cartel met in Vienna last week to discuss the current state of play in the industry and announced on Saturday a deal to increase production for the first time since before 2017, when OPEC imposed a landmark supply cut to tighten the market and boost prices.

However, with oil prices escalating to within touching distance of the $80 a barrel mark in recent months and due to unplanned disruptions in supply in Venezuela and Angola, OPEC has reversed its production cut, with around 1 million extra barrels per day (bpd) expected to enter the market.

The supply increase will be spearheaded by Saudi Arabia, after Saudi Energy Minister Khalid Al-Falih told reporters the Middle Eastern country will do whatever is necessary to keep the market in balance.

“The only country that can increase production is Saudi Arabia, so its interpretation of the deal is the one that matters,” said Ann-Louise Hittle, consultant at Wood Mackenzie Ltd.

Despite the recent drop in the price of Brent crude, analysts are reporting that global oil markets will likely remain relatively tight this year.