Oil prices plunged on Friday to their lowest levels in weeks, on the back of reports that the Organisation of the Petroleum Exporting Countries (OPEC) and Russia are considering increasing production. Both West Texas Intermediate (WTI) and Brent crude fell by more than 3% to $67.50 and $76.44 respectively.
Both Saudi Arabia and Russia are in discussions about raising their production limits, by adding up to 1m barrels per day to the market. Meanwhile, the OPEC could announce a change in Vienna next month, discussing plans to lift its members’ production for the first time since 2016.
Both the OPEC and a group of non-OPEC countries led by Russia have reduced their crude oil production since January 2017 to curb the global supply that had pulled prices to multi-year lows.
Consequently, the plan now is to lift their production amid worries that Iran’s exports will decline following US President Donald Trump’s decision to pull out of the nuclear deal with Tehran and re-impose sanctions, as well as the output collapse taking place in Venezuela.
Brent crude prices had been rising even before Trump’s decision, with prices climbing more than 40% over the past year. Brent rose more than $1.10 on Thursday to reach a high of $80.50 a barrel, the highest since late 2014.
Following the decline in production from Venezuela, this would allow members to produce more to offset Venezuela’s declines. However, an agreement was not reached yet and the negotiations will continue for the next few weeks.
Russian Energy Minister Alexander Novak met with his Saudi counterpart, Khalid Al-Falih, in Saint Petersburg to discuss the deal. According to Reuters, Al-Falih is particularly concerned about the impact of oil prices above $80 a barrel on consumer nations like China and India.
Earlier in April, Trump took to Twitter to criticise the OPEC’s push for higher prices, saying: “Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!”
Egypt is highly vulnerable to crude oil price fluctuations, as each $1 increase in the Brent crude price would cost the state EGP 4bn, according to the Finance Ministry.
