Oil Prices up as Attention Shifts to OPEC+ Meeting

May 28, 2024
OPEC Meeting US Stocks

By Adedapo Adesanya

Oil prices rose over 1 per cent in slow trade, owing to public holidays in Britain and the United States as the market’s attention turned to an anticipated meeting of oil producers.

The Brent crude improved its valued by $1 or 1.2 per cent to close at $83.12 a barrel and the US West Texas Intermediate (WTI) crude futures were up 93 cents to $78.65 per barrel.

Brent lost about 2 per cent last week and WTI nearly 3 per cent after Federal Reserve minutes showed some officials would be willing to raise interest rates further if it were deemed necessary to control stubbornly high inflation.

The public holidays in the US and UK on Monday kept trading relatively thin meaning the focus shifted to the upcoming meeting of the Organisation of the Petroleum Exporting Countries and allies (OPEC+), which pushed back by a day to June 2 and will be held online.

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.

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 per cent of global oil demand.

OPEC has said it expects another year of relatively strong oil demand growth of 2.25 million barrels per day, while the International Energy Agency expects much slower growth of 1.2 million barrels per day.

Markets will also be watching the US personal consumption expenditures index this week for more signals about interest rate policy. The index, due to be released on May 31, is reportedly the US Federal Reserve’s preferred measure of inflation.

The prospect of higher-for-longer interest rates has strengthened the US Dollar, making oil more expensive for holders of other currencies.

On Monday, key European Central Bank (ECB) policymakers said the bank has room to cut interest rates as inflation slows but must take its time in easing policy.

Figures for inflation in the euro zone are due on Friday and economists believe an expected tick up to 2.5 per cent should not stop the ECB from easing policy next week.

Meanwhile, Goldman Sachs raised its global oil demand forecast for 2030 on Monday and expects consumption to peak by 2034 on a potential slowdown in electric vehicle adoption, keeping refineries running at higher-than-average rates till the end of this decade.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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