OPEC+ online meeting suggests “nothing to see here” – RBC
2024.05.29 09:14
Investing.com – A group of major oil producers is set to meet this weekend to discuss future output levels, and RBC Capital Markets expects the cartel to present an united front, keeping policy unchanged.
The Organization of the Petroleum Exporting Countries and allies including Russia, a group known as OPEC+, is scheduled to meet online, a change from the original in-person plan, on Sunday to discuss their joint oil production policy.
The group is currently cutting output by 5.86 million barrels per day (bpd), equal to about 5.7% of global demand, in an attempt to balance a market hit by falling demand, lifting prices in the process.
The cuts include 3.66 million bpd by OPEC+ members to the end of 2024, as well as a further 2.2 million bpd of voluntary cuts by some members, mainly Saudi Arabia, which expire at the end of June.
The move to forgo an in-person meeting, likely signals a “nothing to see here” production decision through year end, according to analysts at RBC Capital Markets, in a note dated May 28.
“We see no appetite at this juncture to add more barrels to the market and trigger another price move to the downside. The current price level is already causing several producers to take on additional debt and push out timelines for some high-profile projects,” RBC added.
“Adding more barrels at this moment would likely yield a suboptimal price environment that would not be offset by additional market share advantages.”
The bank sees less discord between key OPEC players on the eve of this meeting and more closing of the ranks, as they seek to navigate the geopolitical headwinds caused by ongoing armed conflict in the region.
“As we noted last week, the UAE’s president HH Sheikh Mohammed bin Zayed made a well-publicized visit to Saudi Arabia earlier this month for a meeting with HRH Crown Prince Mohammed bin Salman,” RBC added.
“In addition, it has been announced that the Saudi Crown Prince has accepted an invitation to Iran, a move that marks a major turnaround from 2016 when diplomatic relations were severed in the wake of the attack on the Saudi embassy on Tehran.”
The possibility of a deeper cut, given the recent oil price weakness, can’t be ruled out, the bank said, “given HRH Prince Abdulaziz’s penchant for Hollywood twist endings. However, we tend to see surprise announcements as more likely when ministers gather in person and coalitions of the willing can be assembled at midnight meetings in the Park Hyatt.”
By 08:25 ET (12:25 GMT), the futures (WTI) traded 0.7% higher at $80.36 per barrel, while the contract climbed 0.6% to $84.46 a barrel.
Both benchmarks are on course for losses of between 2% and 3% this month.
