The oil price is a little lower Wednesday, following reports suggesting OPEC could decide to increase some production rates, while keeping the current output cap in place.
That possibility has been raised, as output from some members states is well-below capacity and likely to remain that way for some time, which is exerting upward pressure on prices.
Mid-afternoon Wednesday, the price of Bent Crude was down around 0.43% at €79.25 per barrel. The price of US WTI crude, meanwhile, fell 0.35% to $71.85.
OPEC could discuss ‘relaxation’ of output cap
Following the oil glut which weighed heavily on the price of oil, OPEC members plus some non-members including Russia, agreed to an oil output cap. This helped ensure the price of the valuable commodity wouldn’t sink so low again, while enough oil was still produced to satisfy demand.
That agreement has held since March 2017 and is currently in place until the end of 2018.
Now however, ahead of the cartel’s next Vienna meeting in June, there is said to be the possibility that the group will relax the rules surrounding the output cap. And, it’s the possibility of higher OPEC oil output levels that is weighing on the oil price.
Collective output cap to remain in place
While it’s possible that some OPEC members could be permitted, even encouraged, to raise their output a little, the overall output level of the group as a whole is set to remain capped at current levels.
That’s because right now, output from Venezuela is currently much lower than its previous levels and also its capacity. And, Iranian oil output is still likely to be hit by US sanctions.
But, although some OPEC, members are already operating at their output capacity, some aren’t. To help make up the shortfall between current output and the cap, Russia, Saudi Arabia, the UAE and Kuwait, will likely be permitted to exceed their individual output cap, by a little.
But, not so far as to exceed the collective output cap for the whole group adhering to the agreement.
And, despite the slight drop in oil prices Wednesday, analysts remain certain that the oil price is set to rise over the longer term, with a growing number of reports suggesting it could hit $100 per barrel by the summer of 2019.