Crude oil futures traded lower on Tuesday morning after the Organisation of Petroleum Exporting Countries and its allies, known as OPEC+, decided to gradually increase crude oil production from April.
At 9.55 am on Tuesday, May Brent oil futures were at $71.15, down by 0.66 per cent, and April crude oil futures on WTI (West Texas Intermediate) were at $68.11, down by 0.38 per cent. March crude oil futures were trading at ₹5963 on Multi Commodity Exchange (MCX) during the initial hour of trading on Tuesday against the previous close of ₹5989, down by 0.43 per cent, and April futures were trading at ₹5961 against the previous close of ₹6002, down by 0.68 per cent.
A media statement by the OPEC+ said the eight OPEC+ countries, which previously announced additional voluntary adjustments in April and November 2023, namely Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman, met virtually on March 3, to review global market conditions and the future outlook.
Taking into account the healthy market fundamentals and the positive market outlook, they re-affirmed their decision agreed upon on December 5, 2024, to proceed with a gradual and flexible return of the 2.2 million barrels per day voluntary adjustments starting on April 1, while remaining adaptable to evolving conditions. “Accordingly, this gradual increase may be paused or reversed subject to market conditions. This flexibility will allow the group to continue to support oil market stability,” the statement said.
The US President, Donald Trump, had asked the OPEC+ to increase crude oil production a few days ago.
In their Commodities Feed for Tuesday, Warren Patterson, Head of Commodities Strategy of ING Think, and Ewa Manthey, Commodities Strategist, said oil prices are under pressure with ICE Brent settling more than 1.6 per cent lower on Monday. This follows news that OPEC+ is sticking with plans to gradually increase supply from April by 138,000 barrels a day in the month. The market had been pricing in the possibility that the group might delay an increase in supply.
“This development hasn’t changed our view on the market, as we already thought supply would return. The increase is likely to make President Trump happy, given the pressure he’s been putting on OPEC to boost supply,” they said.
Quoting a Bloomberg survey, they said OPEC oil production increased by 320,000 barrels a day month-on-month in February to 27.35 million barrels a day. The bulk of the increase was driven by Iraq, with output growing by 150,000 barrels a day to 4.16 million barrels a day, leaving production above its target level of 4 million barrels a day. Fairly sizable increases were also seen in Libya, Venezuela and the UAE.
Meanwhile, Trump increased tariffs on China to 20 per cent from 10 per cent, while also allowing 25 per cent levies to go ahead for Canada and Mexico starting Tuesday.
For Canadian energy, the tariff is set lower at 10 per cent. Given the lack of alternative export capacity for Canadian oil, discounts for Canadian crude will increase thanks to these tariffs, they said.
In a latest development, Trump paused military aid to Ukraine on Monday. This followed a clash between the US and Ukrainian presidents in the US last week. Market players opine that the latest development could help in easing sanctions on Russia. This in turn may lead to increase in oil supply by Russia to the global market.
Reacting to a statement by the Ukraine President, Volodymyr Zelensky, that the end of war with Russia is very far away, Trump posted on the social media platform Truth Social that this is the worst statement that could have been made by Zelenskyy, and America will not put up with it for much longer!
“It is what I was saying, this guy doesn’t want there to be Peace as long as he has America’s backing and, Europe, in the meeting they had with Zelenskyy, stated flatly that they cannot do the job without the US – Probably not a great statement to have been made in terms of a show of strength against Russia,” he said in the post.
March natural gas futures were trading at ₹360.80 on MCX during the initial hour of trading on Tuesday against the previous close of ₹355, up by 1.63 per cent.
On the National Commodities and Derivatives Exchange (NCDEX), April dhaniya contracts were trading at ₹8040 in the initial hour of trading on Tuesday against the previous close of ₹8010, up by 0.37 per cent.
March guargum futures were trading at ₹9873 on NCDEX in the initial hour of trading on Tuesday against the previous close of ₹9897, down by 0.24 per cent.
