- OPEC+ delegates have said they don’t expect a change in oil production policy this weekend, which appears to be the stance of markets.
- Despite these reassurances, OPEC+ has a history of surprising oil markets and short sellers are bound to be on edge.
- OPEC+ continues that believe Chinese demand will boost oil prices in the second half of the year and is unlikely to cut unless Chinese demand disappoints.
By Michael Kern
OPEC+ is not expected to announce a change in oil production policy at the in-person meeting this weekend, OPEC+ delegates told CNBC ahead of the much-anticipated gathering.
It is unlikely that the OPEC+ group led by Saudi Arabia and Russia will agree on deeper cuts, two months after the shock April announcement of some of the biggest OPEC+ producers of additional cuts by the end of this year, most analysts say.
Yet, they are cautious in their predictions and recall the surprises OPEC+ has delivered to the market through the years, especially in light of last week’s warning from Saudi Energy Minister Prince Abdulaziz bin Salman to speculators to “watch out.”
According to the anonymous OPEC+ delegates who spoke to CNBC on Friday, the alliance will not be changing its production policy unless demand in China disappoints in the coming months.
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Expectations from OPEC and from all analysts and forecasters are that China will drive a rebound in oil demand in the second half of this year, tightening the market and thus supporting oil prices.
Other sources told CNBC that the OPEC+ group would be comfortable with Brent prices above $75 a barrel or in the $70-$80 range.
Early on Friday, Brent Crude traded above $75 per barrel, at $75.68, up by 1.76% on the day after the Senate voted to pass a debt ceiling bill that ended fears of a U.S. debt default.
Ahead of the OPEC+ meeting, while the Saudi energy minister warns short sellers, Russia is dropping hints that it would prefer the group’s production to remain unchanged.
Kremlin spokesman Dmitry Peskov said on Friday that Russia continues to be in contact with other OPEC+ producers but declined to comment on the outcome of the meeting.
The consensus points to a no-change in output policy, Saxo Bank said in a note on Friday.
“However, given the recent rant against speculators from the Saudi energy minister, nothing can be ruled out, and with that in mind positions are likely to be scaled back ahead of the weekend,” the bank’s analysts added.
NB: Michael Kern wrote this article for Oilprice.com
