Oil prices are saved at the last minute, leaving the bullish scenario open.
The progress of the infringement is weighing on the price of oil
Markets reacted to concerns that high inflation could persist and reduce demand. Some analysts said oil prices remain weak due to concerns about the Federal Reserve’s interest rate policies and rising crude oil inventories in the United States. Additionally, a Reuters report indicated that Vladimir Putin may seek a ceasefire in Ukraine, increasing pressure on the market.
Minutes from the Fed’s latest meeting showed that some policymakers were willing to raise interest rates further if inflation rose. However, Fed Chair Jerome Powell said further increases were unlikely. Higher interest rates increase the cost of borrowing, slowing economic activity and reducing demand for oil.
The spotlight is on the next OPEC+ meeting
OPEC+’s next policy meeting will be held online on June 2, a day later than expected, and the group is expected to extend production cuts into the second half of the year. Saudi Arabia and its partners will meet to consider production cuts of around 2 million barrels a day, introduced to prevent a surplus and support oil prices. The decision to hold the meeting online may have been influenced by the health of Saudi King Salman and the death of Iranian President Ebrahim Raisi. The move is seen as a clear indication of maintaining current production quotas.
The online meeting marks a further shift away from physical meetings, a trend that began during the pandemic. Previous cut renewals were announced by individual member countries and not by OPEC+ as a whole. The group’s intervention has been successful in keeping oil prices above $80 a barrel, although Saudi Arabia would need prices closer to $100 to cover its ambitious spending plans. OPEC+ is also reviewing member countries’ production capacity to set separate targets for 2025.
The tailwind of prices could push the price of oil higher again
Oil’s week was almost entirely bearish, but with the final blow on Friday, prices recovered the last bastion against the bears, $77.21 area. An upward restart could therefore be probable according to the scenario shown in the figure. Otherwise, prices could accelerate downwards.
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