OPEC+ likely to extend supply cuts at next policy meeting – analysts

Oil market watchers expect OPEC and its allies to extend the ongoing supply cuts of 2.2 million b/d into the third and fourth quarters of this year.

PHOTO: Flags of OPEC+ member countries. Getty Images

The Organization of the Petroleum Exporting Countries and its allies (OPEC+) are expected to extend their voluntary supply cuts in a bid to prevent a global surplus.

“The [oil] market remains beholden to OPEC’s supply policy, with expectations high that it will extend current production cuts until the end of the year,” SPI Asset Management’s managing partner Stephen Innes said.

Earlier this month, a Bloomberg survey showed 87% of its respondents expecting an extension of supply cuts when the group convenes to discuss its output policy early next month.

The next big event in the oil market is the OPEC+ meeting on output policy, "with internal pressure in the group to constrain supply to keep prices elevated,” Saxo Bank’s strategy team wrote in a note.

OPEC’s second-largest producer Iraq will stick to its commitments towards the group and adhere to the pledged supply cuts, its oil minister Hayyan Abdul Ghani said on Sunday. His statement has eased some uncertainties about what OPEC members may decide at their next meeting, two analysts from ING Bank said.

“There will likely be increased noise in the lead-up to the next Joint Ministerial Monitoring Committee (JMMC) meeting scheduled for 1 June,” ING Bank’s analysts said.

Brent futures have come down to around $83/bbl amid concerns over demand growth in the US and China. A further decline in Brent’s price could increase the likelihood of extension of supply cuts by the coalition.

“OPEC+ members will also become uncomfortable if Brent starts flirting with $80/bbl, a level which is not too far away,” ING Bank’s analysts added.

“It’s very clear that OPEC is more than likely going to extend their production cuts into the end of the year with the possibility they will run into next year,” Price Futures Group’s senior market analyst Phil Flynn said.

By Aparupa Mazumder 

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