OPEC+ is meeting again today to set oil production rates for the month of May. The 13-member organization along with non-member Russia and ten other countries which collectively are referred to as OPEC+, is continuing its new strategy of monthly meetings to allow itself to adjust to the market. Here’s what to watch for:
Prices spiked above $70 on Mar. 7 but are lower now. Brent is trading in the low-$60 range, and WTI is just below $60 as of midday Wednesday. The recent fluctuations (as well as high gasoline prices, especially in the United States) may have given some the impression that prices are higher, but Brent is actually more than 8% off its March highs.
At its technical meeting earlier in the week, OPEC took the notable step of somewhat-publicly refuting OPEC’s own economists. OPEC members instructed the professionals in the organization to revise Q2 oil demand forecasts down. Though news reports are conflicting, from what we know, it seems the driving force behind this revision was Saudi Arabia, which is looking to promote a rollover of current production cuts to prop up prices. Recall, Saudi Arabia is still voluntarily withholding 1 million bpd from the market. Though traders would like guidance on when Saudi Arabia plans to phase these barrels back into the market, such guidance is unlikely this week.
At the same time, Russia is likely to want a modest production increase, not dissimilar to Russia’s typical stance. Russia claims it has to pump more oil to satisfy domestic needs, and Russia can more easily increase production as the winter freeze thaws in its northern oil fields. OPEC+ has already approved Russia’s requests for modest production increases twice this year, so there is no reason to believe such a request would be refused this month.
The interesting discussions behind closed doors may revolve around the producers’ views of oil prices today. Do they see $70 per barrel as a reachable and sustainable target or do they see Brent’s recent spike above $70 as a singular event?
Reporters and analysts will be looking for clues about this during the OPEC+ press conference—if a press conference is held after this month’s meeting.