OPEC+ has announced a significant increase in oil production for August, adding 548,000 barrels per day, which substantially exceeds analysts’ expectations. According to Bloomberg Intelligence, this move could lead to an oversupply in the market: in the third quarter, the surplus may reach 600,000 barrels per day, rising to 850,000 in the fourth quarter, reports Baltimore Chronicle with reference to Bloomberg.
Analysts believe that continued production growth could cause global Brent oil prices to drop below $60 per barrel. This level is significantly below the average breakeven point required for most OPEC member states. Bloomberg Intelligence estimates that the average breakeven price for the cartel is $62, while Saudi Arabia needs $81 per barrel to balance its budget at a production rate of 9.1 million barrels per day. If the kingdom increases output beyond 10 million barrels, the breakeven point may drop to $72.
At the current average price of $67.45 per barrel, Saudi Arabia’s budget may face a deficit of around 10% of GDP. Meanwhile, a further price decline below $50 could undermine the profitability of U.S. shale oil producers, whose production costs are estimated between $40 and $50 per barrel.
It is expected that in September, OPEC+ may once again raise output quotas by another 548,000 barrels per day, which would further deepen the oversupply in the global oil market.
Earlier we wrote that Orlen completely ends russian oil supplies to Czech refinery.