Oil Prices Plummet Even as OPEC Works to Extend Cuts

Oil prices took a sharp turn downward on Wednesday even after it was announced that OPEC ministers are working diligently to extend their production cuts, a move that was made to keep prices stable in the face of record U.S. production. UAE Energy Minister Suhail bin Mohammed al-Mazroui said that he thinks the cuts should be confirmed “at least until the end of the year.” OPEC’s production cuts have been in place since January, when they began efforts to cut supply by 1.2 million barrels per day.

In a frustrating move for OPEC, the United States has continued to increase shale output, a decision which directly counteracts OPEC’s efforts. According to the Energy Information Administration, the U.S. is expected to add 83,000 barrels per day in June. On Tuesday, the American Petroleum Institute (API) reported that the U.S. saw an unexpected increase in crude oil inventories last week, to 4.852 million barrels, surpassing analyst expectations for a 481,000 barrel reduction in inventory. According to CNBC, U.S. Deputy Energy Secretary Dan Brouillette told the news outlet early on Wednesday that the U.S. will continue to produce all-time highs of 12 million barrels per day at least through next year, and that production may near 13 million barrels per day. Brouillette was quoted as saying that “U.S. production numbers are going to continue for quite some time.”

Also complicating matters is continued concern that President Donald Trump’s tariff threats will materialize, a move which would weaken global demand. Trade concerns sent oil prices to their lowest level since January last week, when they fell below $61 per barrel for the first time since January.

U.S. WTI futures were down 1.65 percent as of 1:10 p.m. HK/SIN to $52.39 per barrel. Brent crude futures were down $1.56 percent to $61.32 per barrel. U.S. WTI futures have slumped nearly 20 percent since hitting their 2019 peaks in April.