OPEC+ Announcement Explained
Why Did They Increase Production Amidst The Tariff Nonsense?
Editor's Note: I want to give a big shoutout to Dr. Anas Alhajji for explaining in detail his take on the OPEC+ production increase announcement today. It was very helpful and guided my thought process in this write-up.
It was liberation day today, and boy, did I feel liberated. To make matters worse, OPEC+ unexpectedly announced a higher-than-expected production increase in May. The original agreement allowed OPEC+ to increase production by ~135k b/d, but OPEC+ announced an increase of 411k b/d or 3 months of production increased piled into one.
This production increase announcement coupled with a market that was already deeply fearful of what the new tariffs will do to the global economy, sent oil prices tumbling.
The sharp drop wiped out an entire month's worth of gains.
What an amazing time to be an energy investor...
But as I will explain below, the OPEC+ production quota increase is not what meets the eye. As I've explained before, the net increase in the market will be negligible due to 1) cheating and 2) already elevated crude exports.