Source: Wall Street News Author: Bu Shuqing
Analysts believe that the policy implications of this decision are obvious, that is, the 2 million b/d production reduction measure will be extended until the second half of this year. After the announcement, the drop in oil prices widened.
OPEC+ suddenly announced on Friday that the June major policy meeting will be held offline to online. According to some analysts, this indicates that OPEC+ may extend the current production reduction measures until the second half of this year.
OPEC has been considering moving the conference online for several weeks, but no exact reason has been given.
According to media reports later, some representatives said that the reasons may include Saudi King Salman bin Abdulaziz's poor health and the sudden death of Iranian President Ibrahim Raisi.
For many oil market observers, the policy implications of this decision are clear.
Crude oil traders expect production cuts of 2 million b/d to remain unchanged, and several representatives have made similar predictions.
Viktor Katona, chief crude oil analyst at market intelligence company Kpler Ltd., said that switching to an online conference clearly suggests that the existing quota will be extended. In April, OPEC+ decided to keep the current oil production reduction policy unchanged, that is, production cuts of 2 million b/d will continue until the end of June.
According to a statement published on the official website, OPEC+ will hold a meeting on June 2 to formulate policies for the second half of this year, one day later than initially planned.
After the announcement, the decline in crude oil prices widened. As of press release, the international benchmark Brent crude oil and WTI crude oil both fell by nearly 0.6%. Since April, oil has fallen by more than 7% cumulatively.
Although OPEC+ has implemented long-term production reduction measures, some member countries have not implemented production cuts well, and production in Iraq and Kazakhstan is still higher than the level stipulated in the production reduction agreement at the beginning of this year. Russia promised to cut production a year ago, but in reality, implementation was delayed for a while.
The supply of crude oil from the US is still increasing. According to the latest data released by the US Energy Information Administration (EIA), the US EIA strategic oil reserve inventory for the week up to May 17 was the highest since the week of April 7, 2023; the increase was the biggest since the week of December 29, 2023, and increased for the 23rd consecutive week.
Recently, the EIA raised its oil production forecast again. In 2024, US oil production will rise to 13.21 million b/d, an increase of 280,000 b/d; in 2025, US oil production will rise to 13.72 million b/d, an increase of 510,000 b/d.
On the demand side, the International Energy Agency (IEA) monthly report lowered the 2024 global crude oil demand growth forecast for the second month in a row, lowering this year's oil demand growth forecast by 140,000 b/d to 1.1 million b/d, mainly due to weak demand in developed countries of the OECD.
edit/lambor