OPEC+’s decision to cut production did not lead to lower oil prices

Oil prices continue to fall in anticipation of a settlement of the conflict between Israel and Hamas, and forecasts of a decline in US oil demand, despite the decline in US stocks and the OPEC+ decision.

At the OPEC+ meeting on June 2, it was decided to extend the agreement to reduce oil production by 2 million barrels/day until the end of 2025. In 2024, all OPEC+ members are allowed to produce 39.425 million barrels/day, and from January 2025, the quota will increase by 300 thousand barrels/day to 39.725 million barrels/day.

In 2024, Algeria, Iraq, Kazakhstan, Kuwait, Oman, Saudi Arabia, the UAE and Russia will voluntarily reduce production by 1.7 million barrels/day and by another 2.2 million barrels/day in the first half of the year alone.

The new US plan to resolve the conflict between Israel and Hamas may stop the war, which has been the main factor behind the rise in oil prices over the past 9 months.

According to the EIA weekly report, gasoline stocks in the US unexpectedly increased by 2.02 million barrels (although experts expected a decrease of 1.5 million barrels), and distillate stocks by 2.5 million barrels, while they were expected to increase. At the same time, crude oil stocks decreased by 4.16 million barrels, while experts had expected a decrease of only 1.8 million barrels. At the same time, crude oil stocks in Cushing (the delivery point for WTI futures) fell by 1.77 million barrels.

Experts expect a slowdown in the US economy, which usually leads to a reduction in oil demand, especially as demand for diesel fuel has fallen to its lowest seasonal level in 26 years.

August futures for Brent crude oil on the ICE Futures exchange in London fell by 3.5% to $81.1 per barrel in three sessions (-1.6% for the month).

According to the forecast of more than forty analysts and economists interviewed by Reuters within two weeks, in 2024 the average price of Brent crude oil will be $84.01 per barrel and WTI crude oil – $79.56 per barrel, while in April prices were forecast at $84.62 and $80.46 per barrel, respectively. Market experts do not rule out the possibility of a decline in oil prices to the level of 76.5-78.5 $/bbl, but the wars in Ukraine and Israel and new steps by OPEC+ may support quotes.

From the point of view of technical analysis, Brent crude oil prices broke through the uptrend and consolidated under the 200-day average price, so they may leave the range of 76-78 $/barrel.

Tags: prices