Oil: Supply normalization pressures prices – BNY

BNY’s Geoff Yu notes that OPEC+ has ratified another production quota increase, extending gradual supply normalization and adding pressure on Brent and WTI. Yu highlights that lower Oil prices, if sustained, could ease a key macro headwind for risk assets and support expectations that major central banks’ next moves will lean toward easier policy rather than renewed tightening.

OPEC+ adds to downside pressure

"OPEC+ has agreed another 188,000 bpd production increase for August, extending the gradual normalization of supply and maintaining the downward pressure on crude prices."

"The move continues a phased unwinding of production curbs introduced a few years ago and lifts the total quota increase since the war began to 940,000 barrels/day, or close to 1% of global demand."

"The decision comes as Gulf exporters restore shipments after an interim peace pact, while Brent has fallen sharply from war highs to close to $72/barrel."

"If sustained, lower energy prices will remove one of the key macro headwinds for risk assets and reinforce the view that the next move by major central banks is more likely to be toward easier policy than renewed tightening."

"The alliance now faces pressure over unity, market share and the risk of a future global supply glut."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)