This month’s oil market report from the OPEC has not only shown that the production in June increased by 393,000 barrels per day after an increase of 336,000 barrels in May, it showed that for the first time since the commencement of the agreement in January, the OPEC produced more than its stipulated target that was set in Last November at the Vienna meeting between OPEC members and participating non-OPEC countries.

Before the agreement in last November, the financial market was predicting the demise of the OPEC cartel as the differences between members were too great to cooperate with each other even in areas which were not of political concern. Those concerns got buried after the agreement. However, those concerns have once again started to emerge as several Gulf nations led by Saudi Arabia severed diplomatic ties with Qatar.

It is being feared that recent geopolitical trouble among members within the OPEC could lead to an abrupt end to the production deal. In addition to that, the declining oil price despite the OPEC agreement making members skeptical of the deal as financial pressures rise. Fuelling these speculations, Ecuador became the first OPEC member to opt out of the agreement citing economic pressure. While Ecuador’s opt out is unlikely to make a major difference due to its small size, it may be the beginning of an unraveling of the deal and it also indicates that how difficult another extension would be when the current agreement expires next year or OPEC members reconvene in November in Vienna headquarter. Ecuador currently produces about 527,000 barrels of oil per day, just 19,000 barrels less than the pre-agreement level.

WTI is currently trading at $46.3 per barrel and Brent at 42.5 per barrel premium to WTI.