BP, Shel, CVX: Oil Stocks Drop as OPEC Gets Set to Open Oil Taps and Boost Supply
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U.S. light crude oil prices dropped more than $1 a barrel on reports of a possible increase in production by OPEC and its allies.
Less Slick Stocks
Brent crude futures were down 88 cents, or 1.23%, at $70.82 a barrel in early trading. U.S. West Texas Intermediate crude was down $1.53, or 2.21%, at $67.73.
BP (BP) was down 1% in early trading with Shell (SHEL) off 0.18% and Chevron (CVX) 0.33% lower.
OPEC members and allies like Russia are reportedly getting close to an agreement to boost production by 548,000 barrels per day in September. It could even come as early as this Sunday, August 3 rd.
More supply onto the market, coupled with continuing concerns over demand in the fragile global economy are likely to lead to lower prices.
The factors which have largely driven the volatility in oil prices this year, see below, are also still present.
Tariff Turmoil
That largely means Trump's tariff policy. He signed an executive order yesterday imposing tariffs ranging from 10% to 41% on U.S. imports from dozens of countries and foreign territories that failed to reach trade deals by his August 1 deadline, including Canada, India and Taiwan.
'We think the resolution of trade deals to the satisfaction of the market – more or less, barring a few exceptions – has been the key driver for oil price bullishness in recent days, and further progress on trade talks with China in future could be a further confidence booster for the oil market,' said Suvro Sarkar at DBS Bank.
Prices were also supported this week by Trump's threats to impose 100% secondary tariffs on Russian crude buyers as he seeks to pressure Russia into halting its war in Ukraine. This has stoked concern over potential disruption to oil trade flows and the removal of some oil from the market.
'It is not possible to completely replace Russian oil supplies in any case, which is why effective sanctions would lead to significantly higher oil prices,' said Commerzbank analyst Carsten Fritsch.
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