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Oil prices crash as OPEC plans 1.8m/bpd supply

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A possible production increase of 1.8 million barrels per day has been proposed by the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC members, including Russia.

The proposal was prompted after Saudi Arabia’s de facto leader of the oil cartel, and Russia have discussed boosting output by some 1 million barrels per day.

In view of this, OPEC and some non-OPEC members have committed to curb their output by about 1.8 million barrels per day until the end of 2018, although this is subject to their meeting in Vienna on June 22 to discuss whether their commitment should remain unchanged or not.

This has triggered a crash in oil prices widely felt on Thursday, as Brent crude was down 20 cents at $77.30 per barrel after settling the last session up 2.8 percent, while the U.S. West Texas Intermediate crude was down 20 cents at $68.01 a barrel.

In the previous session, it settled up $1.48, or 2.2 percent, at $68.21 per barrel.

Meanwhile, U.S. crude inventories rose by 1 million barrels in the week to May 25 to 434.9 million barrels.

According to data from industry group, the American Petroleum Institute, although analysts had expected a decrease of 525,000 barrels.

With the surprise rise in U.S. crude inventories expectations that the Organization of Petroleum Exporting Countries,OPEC and other producers could increase output at a meeting in June, the oil market may continue to react.

“With the OPEC meeting still another three weeks away, oil prices are likely to remain sensitive to headlines,” ANZ bank said in a note.

A Gulf source familiar with the thinking of Saudi Arabia said OPEC and its allies aim to continue their agreement to cut oil output by the end of this year but are ready to make gradual adjustments to offset any supply shortfall.