By Adedapo Adesanya
The international crude benchmark, Brent Crude, dropped below $80 on Tuesday on scepticism about the decision of the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) to boost supply later this year into a global market amid weakening demand.
Its price went down by 1.07 per cent or 84 cents to $77.52 per barrel, the first time it was trading in the region since February.
On the other hand, the US West Texas Intermediate (WTI) crude futures finished lower by 97 cents or 1.31 per cent to $73.25 per barrel during the trading session.
OPEC+ agreed on Sunday to extend most of their oil output cuts into 2025 but left room for voluntary cuts from eight members to be unwound gradually, beginning in October.
Traders are already worried that high interest rates are slowing down the world economy, and the planned release in October makes them even more concerned about oversupply.
There are a lot of bad signs coming from big economies like the US, China, and Europe that they might not need as much oil as was thought for the rest of the year. On top of that, more oil is coming from countries other than OPEC, like the US.
Market analysts noted that if this trend continues, it may indicate that the global economy is not improving as expected.
The United Arab Emirates was the big winner of the OPEC+ meeting, having secured another upgrade to its official production quota, allowing it to ramp up output by 300,000 barrels per day in several steps throughout 2025.
Even though Saudi energy minister Prince Abdulaziz bin Salman maintained that OPEC+ can pause or even reverse the upcoming relaxations, the market at large saw it as a sign of more supply in a period of uncertain demand.
Crude oil inventories in the US rose this week by 4.052 million barrels for the week ending May 31, according to the American Petroleum Institute (API), after analysts had forecast a 1.9 million barrel draw. For the week prior, the API reported a 6.490 million barrel dip in crude inventories.
This showed that the demand side in the world’s top oil consumer didn’t use much gasoline around last week’s Memorial Day weekend, which is regarded as the start of the US summer driving season.
The official data from the US government via the Energy Information Administration (EIA) will be released later on Wednesday.
Dipo Olowookere