OPEC+ discord hits ANS

Cartel considering adding additional supply boost beginning in June

Steve Sutherlin

Petroleum News

Alaska North Slope crude plunged $1.66 April 23 to close at $68.51 per barrel, while West Texas intermediate plummeted $2.04 to close at $62.27 and Brent plunged $1.32 to close at $66.12.

Crude prices were hit after news broke that the Organization of the Petroleum Exporting Countries and its allied exporting nations might accelerate oil output boosts in June for a second consecutive month, based on comments to Reuters made by three sources familiar with OPEC+ talks.

OPEC+ will meet on May 5 to discuss output changes in June.

Reportedly, tensions were on the rise in the group as a dispute over compliance with production quotas worsened.

Erlan Akkenzhenov, Kazakhstan's energy minister, told Reuters April 23 that his country would try to adjust its output in line with the OPEC+ plans but that it had to act in its own "national interests," adding that the country had limited control over international oil companies that dominate its oil production.

"We will try to adjust our actions," Akkenzhenov said. "If our partners ... are not satisfied with the adjustment of our actions, then again we will act in accordance with national interests with all the ensuing consequences."

"The Kazakhstan story quickly morphed into other OPEC+ states wanting to increase production further," Mizuho's Robert Yawger said in a note, as reported April 23 by the Wall Street Journal.

An accelerated unwinding of cuts to the tune of 411,000 barrels per day in May by OPEC+ was to be offset by compensation from members that had previously produced above their agreed levels.

"The overproduction appears to be here to stay and there will now be a heavy focus on OPEC+'s response moving forward," Alex Hodes of StoneX said in a note.

The fall in crude prices could not be derailed by reports from Reuters that the Trump administration would consider lowering tariffs on imported Chinese goods pending talks with the Asian nation, and that any action would not be made unilaterally, according to a source familiar with the matter.

The source's comments came on the heels of a Wall Street Journal report that the White House is considering cutting its tariffs on Chinese imports to de-escalate tensions.

U.S. commercial crude oil inventories for the week ending April 18 -- excluding the Strategic Petroleum Reserve -- edged up by 200,000 barrels from the previous week to 443.1 million barrels, 5% below the five-year average for the time of year, the U.S. Energy Information Administration said in its April 23 petroleum status report.

The inventory rise fell short of the 600,000-barrel jump called for in a survey by The Wall Street Journal.

Total motor gasoline inventories fell by 4.5 million barrels over the period, to 229.5 million barrels -- 3% below the five-year average for the time of year, the EIA said. Distillate fuel inventories decreased by 2.4 million barrels to 106.9 million barrels -- 13% below the five-year average for the time of year.

Gasoline inventories were expected to fall by 1.6 million barrels to 232.4 million barrels and stocks of distillate fuels were forecast to be up by 100,000 barrels, based on the WSJ poll.

ANS forays into the $70s

On April 21, ANS fell $1.36 to close at $69.11, WTI fell $1.60 to close at $63.08 and Brent fell $1.70 to close at $66.26.

ANS also topped $70 on April 17, jumping $1.82 to close at $70.47. WTI leapt $2.21 on the day to close at $64.68, and Brent leapt $2.11 to close at $67.96.

From Wednesday to Wednesday, ANS fell 14 cents from its April 16 close of $68.65 to $68.51 on April 23.

On April 23, ANS closed at a premium of $2.39 over Brent, and at a premium of $6.24 over WTI.

Oil prices may weaken further in 2025 as new production swells and demand remains capped by China's faltering growth, according to the International Energy Agency.

The IEA sees "slow demand growth in the markets, mainly driven by what is happening in China," IEA Executive Director Fatih Birol said in a Bloomberg television interview. "If there are no other surprises, we may expect oil prices to see a downward pressure further."

A "change in the trade war's context in a positive direction may increase the global economic outlook, and we may see oil demand slightly higher than what we have now," Birol said, adding that it's hard to predict a direction for Iran's oil exports pending its talks with the Trump administration.

ANZ Research analysts said in a note that although the specter of slowing demand is depressing market sentiment, high-frequency market indicators point to seasonal demand strength, Barron's reported April 23.

Improving margins on the crack spread -- the price difference between crude oil and refined products such as gasoline and heating oil -- are supporting U.S. and China refinery operating rates, while U.S. jet fuel demand is above pre-pandemic levels, ANZ said.

Overall, ANZ kept a neutral outlook on oil prices.