The Organization of Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, could decide to maintain the current production policy during their upcoming meeting on June 4, Rystad Energy said on Thursday, citing tight market conditions that are expected to lead to higher oil prices in the second half of the year.
The ministers of major oil-producing countries in the 23-member group will convene on Sunday to decide on the next production scheme.
It will be the group’s first ministerial meeting after some OPEC+ countries in April decided to cut output by 1.6 million barrels per day (bpd) on top of their existing cuts of 2 million bpd in place since October last year.
Without ruling out 'further production cuts', Jorge Leon, senior vice president of oil market research at Rystad Energy, predicted that the group may stick to current production levels, taking a 'wait and see' approach.
Leon said recent macroeconomic headwinds, which are putting significant downward pressure on oil markets despite the voluntary cuts implemented by some OPEC+ countries since May, would normally lead to an output cut decision.
The US shale industry’s unresponsiveness could further support a production cut decision, propping up prices without the risk of losing market share, he said.
However, Leon added that the impact of higher oil prices on the global economy would weigh heavily on the ministers’ minds during the meeting on Sunday.
Rystad warned that high oil prices would fuel inflation in the West and encourage central banks to continue increasing interest rates, a detrimental move for the global economy and oil demand.
Leon, taking positive demand forecasts into consideration, said that maintaining current output could be 'the most prudent course' for the OPEC group.
According to Rystad Energy’s real-time global traffic monitoring data, activity has remained flat in the last six weeks compared to 2019.
Furthermore, aviation demand paints a gloomier picture, as mobility rates are flat compared to 2019 and stubbornly below 2019 levels since February, the agency added.
By Sibel Morrow
Anadolu Agency
energy@aa.com.tr