OPEC+ likely to extend production cuts in June

LONDON: Saudi Arabia and its allies in OPEC+ are likely to keep oil production unchanged for a further three months when ministers review output allocations on June 1.

The tightening of petroleum supplies and depletion of inventories widely anticipated at the start of the year has failed to materialise so far.

If OPEC+ (Organization of the Petroleum Exporting Countries and allies) officials had hoped to increase production into a tightening market characterised by rising oil prices they are likely to be frustrated.

Crude stocks, futures prices and calendar spreads are all at similar levels to a year ago, making a significant increase in output unlikely. The group may nonetheless decide it needs to rescind some of last year’s output cuts to pre-empt a further rise in production from the United States, Canada, Brazil and Guyana and avoid conceding more market share.

But current market conditions mean any increase is likely to be symbolic, in the absence of a wholesale shift in strategy to increase volumes and accept lower prices.

Front-month Brent futures have averaged $84 per barrel so far in May putting them exactly in line with the average since the start of the century after adjusting for inflation.