MNI BRIEF: More Opec Output To Lower Oil Price -ECB Bulletin

A further increase in Opec oil production could put downward pressure on oil prices, the European Central Bank said in a pre-release of its economic bulletin published Tuesday, noting that key indicators “suggest that Opec has strong incentives to further increase production”.

Alongside with U.S. tariffs, Opec’s surprise decision to increase oil supply has been a key factor in the recent decline in prices, the ECB said, adding that the current situation has similarities to the one seen in 2014 when Opec behaviour led to a sharp and persistent price decline at a time when inflation was low.

ECB model based estimates indicate that if Saudi Arabia were to further increase oil supply, oil prices could decline by an additional 10%. However, several indicators suggest that a sharp decline like the one seen in 2014 is unlikely because it would require further non Opec supply growth too.