OPEC+ expected to extend oil production cuts

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The OPEC+ group is likely to roll over their current production cuts into the second half of 2024 when producers meet online this weekend, according to analysts and market expectations.

The alliance is likely to extend the current 2.2 million barrels per day (bpd) production cuts, four anonymous OPEC+ delegates told CNBC ahead of the crucial meeting.

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The group would want to avoid an abrupt change in course amid relatively stable oil prices in recent weeks, one of these delegates told CNBC.

Last week, OPEC said that the OPEC+ alliance would hold its meeting in early June a day later than initially planned, and via a video conference instead of in person. All meetings previously planned to take place in person in Vienna on June 1 will now be held online on June 2.

The three key meetings that will be now held via video conference are the meeting of the Joint Ministerial Monitoring Committee (JMMC), the panel monitoring market developments and potentially recommending actions to the ministers to take, the meeting of the OPEC ministers, and finally, the meeting of the ministers of the wider OPEC+ coalition.

The fact that the OPEC+ meetings will be held online suggests that the producers in the pact have more or less reached an agreement about how to proceed with the current cuts, analysts have said.

OPEC+ could still opt for tweaks to output policy later this year if summer oil demand is strong and leads to depleting inventories, according to market observers.

“The market expects OPEC+ to fully roll over its additional voluntary supply cuts into the second half of the year. Anything less will put further pressure on prices in the short term,” ING commodities strategists Warren Patterson and Ewa Manthey wrote in a Friday note.

“It would be more difficult for the group to surprise to the upside. Agreeing on deeper cuts would be challenging, particularly when a handful of producers are already producing above their target levels.”

While a full rollover of the cuts would be important for sentiment and for keeping prices from falling in case market expectations are not met, it is not needed in terms of fundamentals “as it will push the oil market into a deep deficit over the summer, a peak demand period,” ING’s strategists said.