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(Bloomberg) -- Oil traders expect Saudi Arabia to steer OPEC+ to agree on another supply surge next week as the kingdom continues its campaign to discipline the cartel’s errant members.
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Key OPEC+ members will probably agree to hike output in June by significantly more than the scheduled amount when they hold a video conference on May 5, according to roughly 60% of traders and analysts surveyed by Bloomberg.
Earlier this month, the Saudis stunned crude traders by pushing OPEC+ to revive 411,000 barrels a day in May — three times the planned volume — in a move delegates said was intended to punish over-producing members Kazakhstan and Iraq by driving down prices.
There could also be a political backdrop to the decision: Riyadh is seeking to strengthen ties with US President Donald Trump, who has renewed calls for the Organization of the Petroleum Exporting Countries to lower fuel costs. Trump is also striving for a nuclear deal with that could ultimately revive oil exports from the kingdom’s regional foe, Iran.
Crude futures plunged after OPEC+’s surprise pivot, which was announced just hours after Trump inititated a trade war with China and other nations on April 2. Brent contracts briefly crashed to a four-year low below $60 a barrel in the ensuing days, and were trading near $63 in London on Wednesday.
With Kazakhstan making little apparent effort to mend its ways, 13 of 23 survey respondents predict that OPEC+ will green-light another hike similar to the previous 411,000-barrel-a-day surge. Another two forecast the increase would be smaller, but still above the standard increment.
“History shows that when OPEC+ leadership decides to encourage compliance by supply pressure, it does not stop until it achieves its goal,” said Bob McNally, president and founder of Rapidan Energy Advisers LLC and a former White House energy official.
So far, the so-called “sweating” of OPEC+ quota cheats is bearing limited results. While Iraq has pledged to keep reducing oil exports, Kazakhstan’s international partners like Eni SpA say they haven’t been pressed to reduce output.
While the price rout does offer relief for consumers and central banks still feeling the effects of inflation, it spells financial pain for oil producers.