Oil prices stabilized in Asian trading on Monday as investors awaited the upcoming OPEC+ meeting scheduled for June 2, where discussions are expected to focus on extending voluntary output cuts for the remainder of the year.
The July contract for Brent crude rose by 24 cents to $82.36 a barrel as of 0638 GMT, while the August contract, which is more actively traded, increased by 29 cents to $82.13. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures climbed by 28 cents to $78 per barrel.
Last week, Brent crude ended about 2% lower, and WTI lost nearly 3% following the release of Federal Reserve minutes indicating a willingness among some officials to tighten interest rates further to address persistent inflation concerns.
With public holidays observed in the U.S. and UK on Monday, trading activity is expected to be relatively subdued.
The OPEC+ meeting, initially scheduled for June 1, has been rescheduled to June 2 and will be conducted online, as announced by OPEC on Friday. Producers will deliberate on the extension of voluntary output cuts of 2.2 million barrels per day into the second half of the year, with indications from three sources within OPEC+ countries suggesting that an extension is likely.
Sugandha Sachdeva, founder of Delhi-based research firm SS WealthStreet, anticipates that oil futures will maintain their current gains on expectations of the output cuts being prolonged. However, Sachdeva highlighted that the trajectory of price movements will be significantly influenced by the U.S. Producer Price Index (PPI) data scheduled for the week, which will inform the Federal Reserve’s approach to potential rate adjustments.
Combined with the existing 3.66 million barrels per day of production cuts valid until the end of the year, the extended output cuts amount to nearly 6% of global oil demand.
Analysts at ANZ emphasized their focus on gasoline usage as the Northern Hemisphere enters the summer season, traditionally characterized by increased driving holidays. While U.S. holiday trips are expected to reach a post-COVID high, the analysts noted that improved fuel efficiency and the rise of electric vehicles (EVs) may keep oil demand subdued. However, they suggested that any decline could be offset by an increase in air travel.
Market participants will also closely monitor the U.S. personal consumption expenditures (PCE) index, scheduled for release on May 31, for further insights into interest rate policy. Additionally, Goldman Sachs revised its forecast for 2030 oil demand to 108.5 million barrels per day (bpd) from 106 million bpd, projecting that peak oil demand will occur by 2034 at 110 million bpd, followed by a prolonged plateau until 2040.
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