OPEC+'s decision to cut production did not lower oil prices

Oil prices continue to fall in anticipation of a settlement of the conflict between Israel and Hamas, and forecasts of a reduction in US oil demand, not reacting to the reduction in US inventories and the OPEC+ decision.

 

At the OPEC+ meeting on June 2, it was decided to extend the agreement to reduce oil production by 2 million barrels/day until the end of 2025. In 2024, all OPEC+ members are allowed to produce 39.425 million barrels/day, and from January 2025 the quota will increase by 300,000 barrels /day to 39.725 million barrels/day.

 

During 2024, Algeria, Iraq, Kazakhstan, Kuwait, Oman, Saudi Arabia, the UAE and the Russian Federation will voluntarily reduce production by 1.7 million barrels/day and by another 2.2 million barrels/day in the 1st half of the year alone.

 

A new US plan to settle the conflict between Israel and Hamas could stop the war that has been the main driver of oil prices for the past 9 months.

 

According to the weekly report of the EIA agency, gasoline stocks in the US unexpectedly increased by 2.02 million barrels (although experts expected a decrease of 1.5 million barrels), and distillate stocks - by 2.5 million barrels, with expectations of their increase. At the same time, crude oil stocks decreased by 4.16 million barrels, against expectations of a decrease of only 1.8 million barrels. At the same time, crude oil reserves in Cushing (the delivery point for WTI futures) fell by 1.77 million barrels.

 

Experts expect a slowdown in the U.S. economy, which usually leads to a reduction in oil demand, especially as demand for diesel fell to a 26-year seasonal low.

 

August Brent oil futures on the ICE Futures exchange in London fell by 3.5% to $81.1/barrel in three sessions (-1.6% for the month).

 

According to the forecast of more than forty analysts and economists polled by the Reuters agency for two weeks, in 2024 the average price of Brent oil will be $84.01/barrel, and WTI oil will be $79.56/barrel, while in April the prices were forecast at 84 .62 and $80.46/barrel, respectively. Market experts do not rule out the possibility of a drop in oil prices to the level of $76.5-78.5/barrel, however, the wars in Ukraine and Israel and new steps by OPEC+ can support quotations.

 

From the point of view of technical analysis, Brent oil prices broke the upward trend and anchored below the 200-day average price, so they can leave the range of $76-78/barrel.