Oil Market Outlook: OPEC+ Extends Cuts Amid Supply-Demand Imbalance
Short Term Boost in Oil Prices Expected
OPEC and its allies’ decision to extend production cuts may momentarily lift oil prices. However, the supply is anticipated to surpass demand in the second quarter due to subdued crude demand and increasing non-OPEC supply.
Surplus Supply Despite Cuts
Macquarie notes that despite the 2.2 million barrels per day production cuts, the global supply-demand balance is expected to remain in surplus in Q2. The impact of the cuts on aggregate OPEC supply has been minimal so far.
Extension of Output Cuts
Russia and Saudi Arabia, leading OPEC+, have prolonged their output cuts until the end of June. This move aims to provide momentum to the oil market, which is showing signs of strength.
Challenges in Demand Recovery
Refineries’ tepid demand for products like gasoline is expected to persist through May, with a predicted uptick in June. This could affect the overall demand-supply balance in the oil market.
Differential Impact of Compliance
While compliant members like Kuwait and Algeria are expected to contribute modestly to tightening the market, less compliant members will play a more significant role in the supply-demand dynamics in Q2.
Upcoming Ministerial Meeting
Monitoring the output and compliance of OPEC+ members remains crucial ahead of the next ministerial meeting scheduled for June 1 in Vienna. This meeting will provide further insights into the future direction of oil markets.
