Possible increase of OPEC production target would mean overproduction will continue in the coming months

The significantly weaker US dollar gave oil prices a boost for a time. At its peak, Brent climbed to $66 per barrel, while WTI reached just shy of $62 per barrel. Prices shed most of their gains again overnight after the American Petroleum Institute reported an unexpected increase in US crude oil stocks of 1.8 million barrels and in US gasoline stocks of 1.6 million barrels last week, notes Commerzbank. 

The US Department of Energy will be publishing the official inventory data this afternoon. They are expected to show the fifth consecutive reduction in crude oil stocks. OPEC members will be gathering for their scheduled meeting on Friday. OPEC will confirm its production target of 30 million barrels per day, expects Commerzbank. There appears no chance of the production target being reduced. 

Recently, however, some market observers have raised the possibility of the production target being increased to 30.5 or 31.0 million barrels per day. This would better reflect OPEC's current overproduction, as OPEC output at present exceeds 31 million barrels per day. If the production target were to be raised, however, this overproduction would retrospectively be declared legitimate. OPEC would thus be sending out a signal that it also plans to produce well in excess of the call on OPEC in future. This would presumably put renewed pressure on the oil price. In other words, an increase in the OPEC production target on Friday would constitute a further declaration of war on oil producers with high production costs, first and foremost the shale oil producers in the US.