Members of the Organization of the Petroleum Exporting Countries (OPEC) and partners including Russia are contemplating an increase in their supplies of oil, which experts say could have a net effect of stabilizing a declining and volatile market.
The oil producers plan to meet in Vienna June 22, and commodity watchers anticipate a loosening of supply curbs that are impacting them, along with other producing nations, such as India and Venezuela.
The quantity of oil that they could release is currently unknown, especially since experts have said the decision must be unanimous. Some member countries may not be eager to take this action right now, especially since prices are rising slightly.
Impact of the Oil Increase
But a gradual release of supply through the second half of 2018 has the potential to be a stable and healthy solution for the oil market, especially if prices remain between $60-$80/barrel.
If it happens, it would reverse a cut in production approved at the beginning of 2017. Following a year of dramatic price drops, OPEC and non-OPEC nations pledged to collectively cut production by about 1.8 million barrels a day through the end of 2018.
While consumers have enjoyed lower prices at the pump, supply reduction policies have caused instability and gradual drops in wholesale prices. The reduction in output has also contributed to economic collapse in oil-dependent nations such as Venezuela.
The U.S. used this opportunity to develop its own sources, and it saw higher output but lower prices over the last year. U.S. crude oil future prices have been declining, and they recently reached $68/barrel and $76.11/barrel for bent crude futures.
Other Factors in Considering an Increase
Another factor in these current discussions is potential disruptions from the U.S. recently reapplying sanctions on Iran after exiting the nuclear agreement. Other European nations have expressed interest in remaining part of this agreement.
Exiting the nuclear agreement has caused a short-term rise in American oil prices and an increase in domestic oil production.
However, at the same time OPEC partners have indicated they have reached the limit of their surplus.