As of late Monday evening in Moscow, Brent crude was trading as low as $49.67 per barrel. Tuesday morning has seen Brent come round, trading at $50.21 as of 08:21 GMT.
Such a drastic fall seems to be due to a rise in OPEC oil production in July to about 32 million barrels per day (bpd), according to various sources, which is 2 million bpd more than OPEC’s target of 30 million, confirmed at the cartel’s meeting in June. That month, however, the cartel also produced more than forecast, at 31.87 million bpd.
This clearly contradicts the words of OPEC Secretary General Abdalla Salem El-Badri after meeting with Russian Energy Minister Aleksandr Novak last Thursday.
“At the last meeting, in June, we agreed that we will not reduce production quotas. It is 30 million barrels a day, and will remain so,” said El-Badri then. He added that the prices wouldn’t go down, as the demand was surging.
German financial giant Commerzbank explained to the Telegraph why OPEC had exceeded its target production.
“Besides record-high Saudi Arabian production, a strikingly high level of production in Iraq is playing its part in this, which this summer has risen to over 4 million bpd for the first time,” said the company.
Another less significant reason for weakening oil is a minor increase in the US rig count. Last week, a report by Baker Hughes showed it rose by five to 664, after the number of oil rigs in use rose by 21 to 659 a week before. However, this is still far from the peak in October 2014, when Baker Hughes reported that there were 1,609 active rigs.