OPEC+ Meeting and Chinese Growth Prospects Affect Oil Stability
Market Assessment and Chinese Growth Prospects
Oil prices showed stability, rebounding after a drop at the start of the week, as news emerged of China considering additional measures to boost its economic growth. Traders are also closely observing the potential extension of supply curbs to be discussed at the upcoming OPEC+ policy meeting. Brent stands below $83 per barrel, while West Texas Intermediate remains above $78. Despite weak credit and inflation indicators reflecting China’s struggle to increase demand as the world’s top crude importer, the planned long-term sovereign bond sales indicate the government’s determination to augment growth and support energy consumption.
OPEC+ Supply Decision and Market Sentiments
Hayyan Abdul Ghani, Iraq’s Oil Minister, initially stated that Baghdad could not comply with further production cuts. However, following his remarks, Ghani clarified that the decision regarding supply adjustments lies with OPEC, emphasizing Iraq’s adherence to the group’s consensus. OPEC+ is scheduled to convene on June 1. Oil prices have been in decline for the past month and a half, relinquishing the risk premium triggered by Middle Eastern tensions. Moreover, a mixed demand outlook and time spreads, a closely monitored market metric, suggest diminishing tightness in market conditions.
Analysts’ Perspectives and OPEC Outlook
Vandana Hari, founder of Vanda Insights in Singapore, predicts that crude prices will continue to face downward pressure due to the diminishing geopolitical risk premium associated with the Gaza conflict. She considers Iraq’s statements on OPEC+ supply as a minor concern. Iraq, second only to Saudi Arabia in OPEC’s production capacity, has failed to fully implement existing cuts, raising concerns within the organization. Nevertheless, most market analysts expect OPEC+ to extend production curbs into the second half of the year, despite the expanding collective spare capacity.
Future Market Outlook
On Tuesday, the Organization of the Petroleum Exporting Countries is set to deliver its market outlook, sharing information on global oil balances, demand projections, and supply dynamics. Additionally, the International Energy Agency will release a report later this week. The prompt spread of Brent, denoting the difference between its two closest contracts and a relevant market indicator, has narrowed to 44 cents per barrel in a backwardation pattern, following a gap of $1.20 just two weeks ago.
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