Oil prices held steady in Asian trading on Monday as markets anticipated the upcoming OPEC+ meeting scheduled for June 2, during which producers are expected to deliberate on the continuation of voluntary output cuts for the remainder of the year.
As of 0638 GMT, the Brent crude July contract saw a modest increase of 24 cents, reaching $82.36 a barrel, while the more-active August contract rose by 29 cents to $82.13. Similarly, U.S. West Texas Intermediate (WTI) crude futures rose by 28 cents to $78 per barrel.
Last week, Brent crude experienced a decline of about 2%, while WTI registered a nearly 3% loss following the release of Federal Reserve minutes indicating a willingness among some officials to tighten interest rates further in response to persistent inflation concerns.
Trading activity on Monday remained subdued due to public holidays observed in both the U.S. and UK, contributing to relatively thin market conditions.
The upcoming OPEC+ meeting, which was rescheduled to be held online, is expected to focus on the extension of voluntary output cuts of 2.2 million barrels per day into the second half of the year. Three sources from OPEC+ countries have indicated that an extension is likely.
Market analysts anticipate that oil futures will maintain their current gains on expectations of the output cuts being extended. However, the trajectory of price movements will be significantly influenced by the U.S. Producer Price Index (PPI) data scheduled for the week, which will offer insights into the Federal Reserve’s approach to potential adjustments in interest rates.
In addition to the voluntary output cuts, which are equivalent to nearly 6% of global oil demand when combined with other production cuts, OPEC has expressed expectations of strong growth in oil demand for the year ahead. Conversely, the International Energy Agency anticipates much slower growth in demand.
ANZ analysts highlighted the significance of monitoring gasoline usage as the Northern Hemisphere enters the summer season, traditionally characterized by high demand due to driving holidays. However, factors such as improved fuel efficiency and the rise of electric vehicles could potentially temper oil demand, although this might be offset by increasing air travel.
Market attention will also be directed towards the U.S. Personal Consumption Expenditures (PCE) index, scheduled for release on May 31, which is considered the Federal Reserve’s preferred measure of inflation.
Separately, Goldman Sachs revised its forecast for 2030 oil demand upwards to 108.5 million barrels per day (bpd) from 106 million bpd, while also predicting peak oil demand to occur by 2034 at 110 million bpd, followed by a prolonged plateau until 2040.