Crude oil WTI tanks 4% as OPEC consider supply increase of 1 million barrels a day

• Saudi Arabia and Russia are considering adding 1 million barrels a day (mbd) to the market while the current cut is at 1.8 million mbd.
• Saudi Arabia Energy Minister Al-Falih says he was targeting $80 a barrel “to support domestic initiatives”. 
• "The moment is coming when we should consider assessing ways to exit the deal very seriously and gradually ease quotas on output cuts," said Russian Energy Minister Alexander Novak.

Crude oil West Texas Intermediate (WTI) melted down 4.24% on Friday (trading at around 67.88) as Saudi Arabia and Russia are considering ramping up production in order to compensate for the sharp decrease output from Venezuela and potentially also Iran which is at risk of sanctions from the United States. Investors are fearful that the production cut agreement between OPEC and non-OPEC members might come to an end. 

The agreement to cut production entered into effect on January 1, 2017, in order to raise oil prices artificially by cutting supply of up to 1.8 million barrels per day. The agreement has already been extended and is set to end at the end of 2018.

OPEC’s compliance surpassed 150% last month as Venezuela production is at a 70-year low. The group intends to bring back the compliance to 100% which entails for the members to produce more. It has been discussed that it could mean increase supply up to 1 million barrels per day to the market. 

Saudi Energy Minister Al-Falih said he is concerned to see “oil prices above $80 a barrel on consumer nations like China and India,” according to Reuters as “Saudi Arabia was roughly targeting $80 a barrel to support domestic initiatives.”

"The moment is coming when we should consider assessing ways to exit the deal very seriously and gradually ease quotas on output cuts," said Russian Energy Minister Alexander Novak.

Meanwhile, it has been reported that large industrial consumers have increased their hedges as they are concerned that prices push higher. “Consumers are hedging, which is supporting the back end of the Brent curve,” said Thibaut Remoundos, founder of Commodities Trading Corp.

Crude oil WTI daily chart 

The bears are in control and support is seen at 67.30 supply zone and at 65.42 swing low. To the upside, resistance is seen at 69.00 figure and 69.55 swing high followed by 70.00 figure.