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Oil prices have continued their strong recovery from last Friday
OPEC + To Introduce Further Cuts?
The recent bearish trend in oil prices reflects a global economic slowdown, empowering pessimistic market sentiment. However, there is increasing speculation that OPEC might implement additional supply cuts to sustain stability and ensure that oil prices remain above the $80 per barrel threshold.
Later this month, OPEC+ is scheduled to meet. And, according to a source the group is considering additional measures to ensure that oil prices remain above the $80 per barrel mark. Despite initial criticism of OPEC's decision to implement supply cuts, the group has been justified by the overall economic landscape and oil price movements in 2023. In an unexpected development today, it was announced that the UAE has been granted permission to increase its oil supply under the current agreement's terms. Abu Dhabi is poised to increase output after winning a concession at the group’s most recent meeting in June. Abu Dhabi argued that long-standing production limits failed to account for capacity additions made in recent years. This has surprisingly had little impact on the Oil price today as markets still fear production cuts from other member states.
Further adding to a bearish narrative is the Venezuela conundrum. The South American nation is actively taking steps to increase production following the lifting of sanctions, and there is a possibility that it could reach substantial production levels in 2024. This development poses an additional challenge to the dynamics of supply and demand.
ANTICIPATING THE UPCOMING WEEK
The focus for the remainder of the week is likely to be on inventories, given the recent rise in stockpiles that played a role in the recent market downturn. Last week also saw an increase in the number of Oil rigs operated by US companies rose last week, this was the first gain in 3 weeks. This usually serves as an indicator for future output, and it will thus be interesting to see if the rig count continues to improve.
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