Oil prices remained largely unchanged in early Asian trading on Monday as market participants adopted a wait-and-see approach before the highly anticipated OPEC+ meeting scheduled for June 2. The meeting is expected to address the potential extension of voluntary output cuts for the remainder of the year.
The Brent crude July contract inched up marginally by 11 cents, settling at USD 82.23 per barrel as of 0036 GMT. The more actively traded August contract saw a modest increase of 13 cents, reaching USD 81.97.
Similarly, U.S. West Texas Intermediate (WTI) crude futures rose 13 cents, trading at USD 77.85.
Trading volumes are anticipated to be relatively thin on Monday due to public holidays in the United States and the United Kingdom, potentially limiting significant price movements.
The upcoming virtual gathering of the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, was initially scheduled for June 1 but was pushed back by a day. According to OPEC’s announcement on Friday, the meeting will now take place online on June 2.
The key agenda item for the OPEC+ members is to deliberate on whether to extend the voluntary output cuts of 2.2 million barrels per day into the second half of 2023. Three sources from OPEC+ countries have indicated that an extension is likely.
These voluntary cuts, combined with the existing 3.66 million barrels per day of production cuts valid until the end of the year, collectively represent nearly 6% of global oil demand.
OPEC has forecasted relatively strong oil demand growth of 2.25 million barrels per day for the current year, while the International Energy Agency (IEA) has projected a more modest growth of 1.2 million barrels per day.
Analysts at ANZ highlighted the importance of monitoring gasoline usage as the Northern Hemisphere enters the summer season, traditionally a peak period for driving holidays. While U.S. holiday trips are expected to reach post-COVID highs, the analysts noted that improved fuel efficiency and the growing adoption of electric vehicles could potentially keep oil demand soft. However, they acknowledged that this effect could be offset by rising air travel.
Market participants will also closely watch the U.S. personal consumption expenditures (PCE) index, scheduled for release on May 31. The PCE index is reportedly the preferred measure of inflation for the U.S. Federal Reserve, and its reading could provide further insights into the central bank’s interest rate policy.
The prospect of higher interest rates for a more extended period has strengthened the U.S. dollar, making oil more expensive for holders of other currencies.