(BFM Stock Exchange) – The courses of black gold are progressing clearly this Monday while the oil exporting countries and their allies decided to increase their production by 411,000 barrels per day. A relief for the market that feared worse.

The market can sometimes seem paradoxical. This Monday, June 2, oil prices are significantly climbing when, however, production increases were announced by the producing countries.

The August contract of the Brent de Mer du Nord, the great international reference for oil prices, advances 4.2% to 65.40 dollars per barrel, around 3 p.m., while that of July on the WTI listed in New York gained 4.6% to 63.59 dollars per barrel.

The oil and parapetrol groups are also progressing. On the SBF 120, Virid gains 3.5%, Vallourec increased by 3.3%when Technip Energies was appreciated by 2.3%. Flagship value of the CAC 40, Totalenergies is up 2%.

On Saturday, the organization of oil producing countries (OPEC) and their allies (OPEC+) announced gross production increases of 411,000 units per day in July, the same figure as in May and June. These increases will be operated by eight countries, namely Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman.

These countries have made this decision with regard to “the stability of global economic prospects and the current good health of market fundamentals, as evidenced by the low level of oil stocks”.

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A lesser harm

“The cartel, formerly focused on the defense of prices, turned to the defense of volumes, using barrels to discipline quota cheaters, put the American shale under pressure and attract the favors of Washington”, recalls Stephen Innes of Spi.

For the market, it is however a lesser evil. As Deutsche Bank notes, press information had mentioned an increase, the magnitude of which could have been stronger. The bank thus deduces that the market “is relieved that the increase is not higher”.

Like any market, oil remains governed by the law of supply and demand, a more abundant supply of normally draws prices down, all other things being.

Since last March, OPEC+ has decided to gradually eliminate production cuts of 2.2 million barrels per day which had been announced at the end of 2023 to support courses before being extended until the beginning of 2025.

“Last week, the market feared an acceleration of the abolition process (production cuts announced at the end of 2023, Editor’s note) at the meeting on Saturday, so that oil prices could react positively to this new one. However, trade tensions remain another factor that strongly influences oil prices,” said UBS in a note published this weekend.

Towards a medium term surplus?

The bank believes that the oil market can currently absorb the barrel influx decreed by OPEC+.

First, because some members, in fact, already produce above their production ceilings. “Thus, the increase in quotas only adds barrels on paper and not real barrels to the market,” writes UBS.

The other reason is that demand is progressing, as almost all the time at this time of the year. “High temperatures in the Middle East support the demand for oil for electricity production intended to cool buildings”, as well as the large period of travel in the northern hemisphere, including the holiday season in the United States, explains UBS.

“These two factors mean that OPEC+ gross exports in May are at levels similar to those in April, and lower than those in March, which explains why the physical market remains tense,” concludes the establishment.

In the longer term, the horizon remains not very clear. “Later in the year, these seasonal requests will weaken, which will result in risk of lower prices if trade tensions continue to affect the financial markets,” said UBS.

“The prospect of an increasing surplus towards the end of the year remains topical,” warns Morgan Stanley.