Oil prices increase marginally

27 May 2024 , 08:55 AM

As markets anticipate that in the OPEC+ meeting on June 2, producers may maintain voluntary output cuts for the remainder of the year, oil prices increased in early Asian trading on Monday. July Brent crude futures price increased by 11 cents to $82.23 per barrel. August contract, which is more active, increased by 13 cents to $81.97.

West Texas Intermediate (WTI) oil futures for the US increased by 13 cents to $77.85.

Monday’s public holidays in the UK and the US were predicted to keep trading light.

OPEC said on Friday that the June 2 meeting of OPEC+—the Organisation of the Petroleum Exporting Countries and its allies—will now take place virtually instead of in person.

Three sources from OPEC+ nations have indicated that an extension of the voluntary output cuts of 2.2 million barrels per day into the second half of the year is likely, and this would be discussed by the producers.

When combined with an additional 3.66 million bpd of production reductions that remain in effect until the end of the year, the output reductions equal about 6% of the world’s oil consumption.

The International Energy Agency projects significantly slower growth of 1.2 million barrels per day, although OPEC has stated that it expects another year of very high growth in oil demand of 2.25 million barrels per day.

This week, the markets will also be keeping an eye on the US personal consumption expenditures (PCE) index for additional clues regarding interest rate policy. The index is the favoured inflation indicator of the U.S. Federal Reserve and is scheduled to be issued on May 31.

After meeting minutes from the Federal Reserve revealed that some officials would be inclined to tighten interest rates further if they considered it was necessary to contain persistent inflation, Brent ended last week almost 2% down and WTI dropped nearly 3%.

Oil has become more expensive for holders of foreign currencies due to the strengthening of the US dollar and the possibility of higher interest rates for longer periods of time.

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