Oil prices hold as markets focus on OPEC+ meeting, Energy News, ET EnergyWorld

VaselineMay 27, 2024

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Oil prices hold as markets focus on OPEC+ meeting, Energy News, ET EnergyWorld

Oil prices steadied in Asian trade on Monday as markets awaited an OPEC+ meeting on June 2 where producers will discuss maintaining voluntary production cuts for the rest of the year.

Brent crude for July was up 18 cents at $82.30 a barrel as of 0409 GMT. The more active August contract rose 25 cents to $82.09.

U.S. West Texas Intermediate (WTI) crude futures rose 24 cents to $77.96.

Brent ended last week about 2 percent lower and WTI lost nearly 3 percent after Federal Reserve minutes showed some officials would be willing to tighten interest rates further if they felt it was necessary to control lingering inflation.

US and UK bank holidays on Monday are expected to keep trading relatively light.

The upcoming meeting of the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, has been postponed by a day and will be held online, OPEC said on Friday.

Producers will discuss whether to extend voluntary production cuts of 2.2 million barrels per day in the second half of the year, with three OPEC+ sources saying an extension was likely.

Oil futures are expected to hold on to today’s gains on expectations of further cuts, said Sugandha Sachdeva, founder of Delhi-based research firm SS WealthStreet.

“However, the trajectory of price action will be significantly influenced by US producer price index (PPI) data scheduled for the week, which in turn will shape the Federal Reserve’s approach to potential rate adjustments,” Sachdeva said.

Combined with another 3.66 million bpd of output cuts through the end of the year, the output cuts are equivalent to nearly 6 percent of global oil demand.

OPEC said it expects another year of relatively strong oil demand growth of 2.25 million bpd, while the International Energy Agency expects a much slower increase of 1.2 million bpd.

ANZ analysts said in a note that they will be watching petrol consumption as the Northern Hemisphere enters summer, traditionally a peak season due to driving holidays.

“While US holiday travel is expected to hit a post-COVID high, improved fuel efficiency and electric vehicles could see oil demand remain low,” analysts said. But they added that this could be offset by increased air travel.

Markets will also watch the US Personal Consumer Expenditure (PCE) index this week for more signals on interest rate policy. The index, due to be released on May 31, is seen as the preferred measure of inflation by the US Federal Reserve.

Separately, Goldman Sachs raised its forecast for oil demand in 2030 to 108.5 million barrels per day (bpd) from 106 million bpd. It also said it expects oil demand to peak at 110,000 million barrels per day through 2034, followed by a long plateau through 2040.