OPEC's Output Boost Causes Oil To Drop - But The Cartel Could Reverse Course

Meanwhile, analysts try to predict the impact of Trump's Russia sanctions: File Image/Pixabay

The Organization of the Petroleum Exporting Countries' (OPEC) agreeing to another large production increase in September stirred bearish sentiment on Monday, with two key crude benchmarks dropping over 1 percent.

Brent settled down 91 cents, or 1.3 percent, at $68.76 per barrel, while West Texas Intermediate settled down $1.04, or 1.5 percent, at $66.29 per barrel.

Over the weekend, OPEC finalized the return of 2.2 million barrels per day (bpd) to the global market, although delegates emphasized that anything is possible in the near-term, including pauses or even a full reversal.

The cartel's next meeting is September 7, and pundits say the outcome could well be another major pivot, influenced by a supposedly looming global market glut versus the potential for geopolitical tensions (including U.S. president Donald Trump's get-tough stance against Russia) causing supply shortages.

The mixed messaging continued with a U.S. jobs data stoking worries that the country's economy was slowing amid Trump's trade measures (even though trade talks have largely been a success and tariffs have poured billions of dollars into Washington's coffers at this early stage).

As for the potential impact of Trump's threatened sanctions against Russia in an attempt to force a ceasefire with Ukraine, Pavel Molchanov, an analyst at Raymond James, said, "The oil market is still assigning a low probability to anything meaningful from the White House as it relates to Russian oil exports.

"The only way to zero out Russian oil exports would be to implement a full-fledged naval blockade of the Russian coastline, which no one is seriously considering."

In other oil news on Monday, BP announced that it had discovered oil and gas in the deepwater Santos basin off Brazil, possibly its largest discovery in 25 years, and potentially facilitating the company's goal of growing its global upstream production output to up to 2.5 million barrels by 2030, from just over 2.3 million in 2024.

Also on Monday, data compiled by Reuters showed that Venezuela's crude and fuel exports dropped by 10 percent in July to average 727,000 bpd; China had the largest share of Venezuela's July exports, estimated at 95 percent.