Crude Oil News Today: Prices Stable as OPEC+ Prepares for Output Cuts Extension

Oil Prices in Holding Pattern Ahead of OPEC+ Meeting

Oil prices remained stable early Monday as markets anticipate the upcoming OPEC+ meeting on June 2, where discussions will focus on extending voluntary output cuts for the rest of the year. Last week, Brent crude ended down by about 2%, while West Texas Intermediate (WTI) fell nearly 3%, influenced by Federal Reserve meeting minutes suggesting possible further interest rate hikes to combat persistent inflation. This prospect has bolstered the U.S. dollar, making oil pricier for other currency holders. U.S. and UK public holidays on Monday are expected to keep trading volumes low.

At 08:04 GMT, Light Crude Oil futures are trading $77.94, up $0.22 or +0.28%.

OPEC+ Expected to Extend Supply Cuts

OPEC+ is expected to extend its current supply cuts into the second half of the year. The group’s June 2 policy meeting will be held online, a shift likely due to the health issues of Saudi King Salman Bin Abdulaziz and the death of Iran President Ebrahim Raisi. The alliance, led by Saudi Arabia and Russia, is withholding about 2 million barrels per day to counteract high U.S. output and a fragile global economic outlook. The online meeting is seen as a sign that the current quotas will be rolled over.

Implications of the Online Meeting

The decision to hold the meeting online, rather than in-person, suggests a continuation of existing policies without major changes. The alliance has moved away from physical meetings since the COVID-19 pandemic, having convened virtually for most of its recent gatherings. The previous extension of output curbs by the group has successfully supported international crude prices, keeping them above $80 a barrel. Saudi Arabia, aiming for prices closer to $100 to support its spending plans, will be keen to maintain these cuts.

Production Capacity Reviews

OPEC+ is also reviewing the production capacities of its member nations, which will influence their output targets for 2025. This review involves consultations with external experts and has sparked some tough negotiations. Notably, the United Arab Emirates has publicly stated a capacity of 4.85 million barrels per day, significantly higher than OPEC’s estimates.

Focus on Gasoline Demand

As the Northern Hemisphere enters the summer driving season, analysts from ANZ are closely watching gasoline usage. While U.S. holiday travel is expected to reach post-COVID highs, increased fuel efficiency and the rise of electric vehicles could keep oil demand subdued. However, this might be balanced by a rise in air travel.

Key Inflation Data and Fed Policy

Traders will also be focusing on the U.S. personal consumption expenditures (PCE) index, set for release on May 31. As the Federal Reserve’s preferred inflation measure, it could provide further signals regarding interest rate policies, influencing market sentiment and crude oil prices.