Oil prices steady as markets turn focus to OPEC+ meeting
2024.05.27 03:59
By Mohi Narayan and Colleen Howe
NEW DELHI (Reuters) – 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 July contract was up 24 cents to $82.36 a barrel as of 0638 GMT. The more-active August contract rose 29 cents to $82.13.
U.S. West Texas Intermediate (WTI) crude futures rose 28 cents to $78 per barrel.
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 U.S. and UK on Monday are expected to keep trading relatively thin.
The upcoming meeting of the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, was pushed back by a day and will be held online, OPEC said on Friday.
The producers will discuss whether to extend voluntary output cuts of 2.2 million barrels per day into the second half of the year, with three sources from OPEC+ countries saying an extension was likely.
Oil futures are expected to maintain today’s gains due to expectations 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 U.S. 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 bpd 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 expects another year of relatively strong growth in oil demand of 2.25 million bpd, while the International Energy Agency expects much slower growth of 1.2 million bpd.
ANZ analysts said in a note that they will be watching gasoline usage as the Northern Hemisphere enters summer, traditionally a high season due to driving holidays.
“While U.S. holiday trips are expected to hit a post-COVID high, improved fuel efficiency and EVs 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 U.S. 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 U.S. Federal Reserve’s preferred measure of inflation.
Separately, Goldman Sachs raised its forecast for 2030 oil demand to 108.5 million barrels per day (bpd) from 106 million bpd. It also said it expects peak oil demand to occur by 2034 at 110,000 million bpd followed by a long plateau till 2040.
(This story has been refiled to add a dropped word in paragraph 2)
