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Oil prices are falling as investors await the outcome of the OPEC+ policy meeting

Image: Reuters Berita 24 English -  Oil prices dropped on Thursday as speculators took advantage of a recent gain ahead of a crucial produc...

Image: Reuters

Berita 24 English -  Oil prices dropped on Thursday as speculators took advantage of a recent gain ahead of a crucial producers meeting later in the day, with some speculation that Saudi Arabia may increase oil production in response to US pressure.

At 0410 GMT, Brent crude was down $2.08, or 1.8 percent, at $114.21 a barrel, after rising 0.6 percent the day before.

After a 0.5 percent gain on Wednesday, US West Texas Intermediate (WTI) crude fell $2.25, or 2.0 percent, to $113.01 a barrel.

The criteria have been marching higher for several weeks as EU and US sanctions against Moscow over its invasion of Ukraine, which Russia refers to as a "special operation," have stifled Russian exports.

Tsuyoshi Ueno, senior economist at NLI Research Institute, noted that while China's gradual breakout from severe COVID-19 lockdowns has added to price support, speculation that Saudi Arabia may increase production has weighed on the market.

"Investors unwound long positions to see whether Saudi Arabia would increase production more quickly in response to US demands, and whether the increase would influence the global supply-demand balance," he explained.

According to the Financial Times, which cited sources, Saudi Arabia is prepared to increase its oil production if Russia's supply falls significantly as a result of Western sanctions.

According to the article, production increases anticipated for September would be pushed back to July and August.

Others, however, believe that OPEC+, which consists of the Organization of Petroleum Exporting Countries (OPEC) and affiliated allied producers such as Russia, will maintain its current production policy.

OPEC is expected to maintain its small monthly increases in oil supply, according to five OPEC+ sources, despite tighter global markets.

"We don't expect any surprises from OPEC+," said Kazuhiko Saito, chief analyst at Fujitomi Securities Co Ltd. "The organization is unlikely to change its strategy when Russian Foreign Minister Sergei Lavrov visits Saudi Arabia."

Because of persisting tightness in global supply and robust demand for fuel in the United States and Europe, Saito anticipated that the market, which had been weakened by profit-taking, will recoup ground following the meeting.

According to the Wall Street Journal, some OPEC members are considering suspending Russia from the agreed-upon production agreement in order to allow other producers to pump much more petroleum, as the US and European nations need.

However, two OPEC+ sources told Reuters that the concept was not mentioned during a technical meeting on Wednesday. Six other OPEC+ representatives indicated the proposal was not being discussed.

According to two OPEC+ sources, an OPEC+ technical committee cut its prediction for the 2022 oil market surplus by around 500,000 bpd to 1.4 million bpd.

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