Oil hardly changed as focus turns to Opec+ meeting
Producers are expected to discuss maintaining voluntary output cuts into the second half of 2024
27 May 2024 - 07:42
byMohi Narayan and Colleen Howe
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New Delhi — Oil prices steadied in Asian trading on Monday as markets awaited an Opec+ meeting on June 2 where producers are expected to discuss maintaining voluntary output cuts for the rest of the year.
The Brent crude July contract was up 18c to $82.30 a barrel by 4.09am GMT. The more-active August contract rose 25c to $82.09.
US West Texas Intermediate (WTI) crude futures rose 24c to $77.96.
Brent ended last week about 2% lower and WTI lost nearly 3% after Federal Reserve minutes showed some officials would be willing to tighten interest rates further if they believed it was necessary to control persistent inflation.
Public holidays in the US and UK on Monday are expected to keep trading relatively thin.
The upcoming meeting of oil cartel Opec and allies, known as Opec+, was pushed back by a day and would be held online, Opec said on Friday.
The producers will discuss whether to extend voluntary output cuts of 2.2-million barrels a day into the second half of the year, with three sources from Opec+ countries saying an extension was likely.
Oil futures were expected to maintain Monday’s gains due the expectation of the cuts being extended, said Sugandha Sachdeva, founder of Delhi-based research firm SS WealthStreet.
“However, the trajectory of price action will be significantly influenced by the US producer price index (PPI) data scheduled for the week, which will in turn shape the Federal Reserve's approach to potential rate adjustments,” Sachdeva said.
Combined with another 3.66-million barrels a day of production cuts valid through the end of the year, the output cuts are equivalent to nearly 6% of global oil demand.
Opec has said it expected another year of relatively strong growth in oil demand of 2.25-million barrels a day, while the International Energy Agency expects much slower growth of 1.2-million barrels a day.
ANZ analysts said in a note that they will be watching petrol usage as the northern hemisphere enters summer, traditionally a high season due to driving holidays.
“While US holiday trips are expected to hit a post-Covid high, improved fuel efficiency and EVs [electric vehicles] could see oil demand remain soft,” the analysts said. But they added that could be offset by rising air travel.
Markets will also be watching the US personal consumption expenditures (PCE) index this week for more signals about interest rate policy. The index, due to be released on May 31, is seen as the US Federal Reserve's preferred measure of inflation.
Separately, Goldman Sachs raised its forecast for 2030 oil demand to 108.5-million barrels a day from 106-million barrels a day. It also said it expects peak oil demand to occur by 2034 at 110,000-million barrels a day followed by a long plateau till 2040.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Oil hardly changed as focus turns to Opec+ meeting
Producers are expected to discuss maintaining voluntary output cuts into the second half of 2024
New Delhi — Oil prices steadied in Asian trading on Monday as markets awaited an Opec+ meeting on June 2 where producers are expected to discuss maintaining voluntary output cuts for the rest of the year.
The Brent crude July contract was up 18c to $82.30 a barrel by 4.09am GMT. The more-active August contract rose 25c to $82.09.
US West Texas Intermediate (WTI) crude futures rose 24c to $77.96.
Brent ended last week about 2% lower and WTI lost nearly 3% after Federal Reserve minutes showed some officials would be willing to tighten interest rates further if they believed it was necessary to control persistent inflation.
Public holidays in the US and UK on Monday are expected to keep trading relatively thin.
The upcoming meeting of oil cartel Opec and allies, known as Opec+, was pushed back by a day and would be held online, Opec said on Friday.
The producers will discuss whether to extend voluntary output cuts of 2.2-million barrels a day into the second half of the year, with three sources from Opec+ countries saying an extension was likely.
Oil futures were expected to maintain Monday’s gains due the expectation of the cuts being extended, said Sugandha Sachdeva, founder of Delhi-based research firm SS WealthStreet.
“However, the trajectory of price action will be significantly influenced by the US producer price index (PPI) data scheduled for the week, which will in turn shape the Federal Reserve's approach to potential rate adjustments,” Sachdeva said.
Combined with another 3.66-million barrels a day of production cuts valid through the end of the year, the output cuts are equivalent to nearly 6% of global oil demand.
Opec has said it expected another year of relatively strong growth in oil demand of 2.25-million barrels a day, while the International Energy Agency expects much slower growth of 1.2-million barrels a day.
ANZ analysts said in a note that they will be watching petrol usage as the northern hemisphere enters summer, traditionally a high season due to driving holidays.
“While US holiday trips are expected to hit a post-Covid high, improved fuel efficiency and EVs [electric vehicles] could see oil demand remain soft,” the analysts said. But they added that could be offset by rising air travel.
Markets will also be watching the US personal consumption expenditures (PCE) index this week for more signals about interest rate policy. The index, due to be released on May 31, is seen as the US Federal Reserve's preferred measure of inflation.
Separately, Goldman Sachs raised its forecast for 2030 oil demand to 108.5-million barrels a day from 106-million barrels a day. It also said it expects peak oil demand to occur by 2034 at 110,000-million barrels a day followed by a long plateau till 2040.
Reuters
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