Production increase, a decision that has no executive guarantee
On the first day of the meeting, OPEC+ members decided to increase production by 648,000 bpd in August, which increased production to the pre-pandemic level. As you know, OPEC+ cut the 9.7M bpd from the overall production after the pandemic hit to balance the supply with demand. In recent months, especially with lifting restrictions in China, market demand has been increasing, while supply did not grow in line with demand. On top of that, Oil and Gas sanctions decreased the Russian supply to the European markets and added tensions to the oil market, lifting the prices more than before.
According to the OPEC and its allies' announcement, these 23-nation group, decided to add 648,000 barrels per day to the overall production, completing the total return of supplies cut off during the pandemic.
At the first reaction, WTI continued its downtrend, which started from above $120. However, more decline will still be under question. Most members are unable to raise output. We know that in recent months, Oil suppliers could not fulfill their supply obligations in full; therefore, this decision, more than being a real and practical act, mostly looks symbolic.
We have Russia, Saudi Arabia, and UAE among the leading suppliers, which can increase the supply. Russia is facing sanctions, and Arabic countries are not sure to cooperate with Biden's request to increase production.
Since geopolitical conditions always influence energy and a more focused oil market, it is impossible to count on this low-scalable production capacity in Saudi Arabia and the UAE. In past days we saw how political tensions in Libya and Ecuador affected the markets.
From the technical point of view, despite the recent decline, still, oil prices moving above the trend line and in a clear bullish trend. Bulls are confirmed in all main charts as long as Oil trades above $94.