Oil prices dipped as the OPEC+ are expected to prolong current output cuts this week amid a shift in focus from Middle East tensions to summer demand.
In the Asian afternoon session, Brent futures for August delivery plummeted by -0.18% to $81.63 per barrel, while West Texas Intermediate (WTI) futures ending in July declined by -0.27% to $77.70 a barrel.
Meanwhile, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) were scheduled to meet in person in Vienna on June 1. Still, they decided to hold the meeting virtually on June 2.
The group producers enforce total supply cuts of 5.86 million barrels per day. Of these, only 2 million barrels per day (bpd) are commitments under OPEC group policy, expiring by year-end.
Moreover, the rest of the slashes are voluntary reductions by a portion of the alliance. A cut of 1.66 million bpd is in effect until the end of 2024, and 2.20 million bpd have been trimmed until the end of the second quarter.
Observers are monitoring whether this latter reduction will be prolonged for another quarter, considering anticipated demand increases.
Meanwhile, the OPEC+ coalition also focuses on individual members’ adherence to quotas, urging overproducers to enact supplementary reductions. Iraq and Kazakhstan have outlined compensation strategies.
Mideast Tension Worries Affect Oil Prices’ Volatility
Oil prices have mostly remained within a narrow range in the first half of the year, with the persistent potential for increases due to events in the Middle East.
Furthermore, analysts mentioned that regional escalations could increase prices by up to $10.00 per barrel. However, OPEC+ delegates said that while the situation in the Gaza Strip continues to exert some pressure, the market has already absorbed most of its impact.
Meanwhile, a group representative has stated that the unforeseen passing of Iranian President Ebrahim Raisi is seen as a tragic incident unlikely to pose a risk to the market. They noted that his successor is expected to follow similar policies.
Moreover, OPEC+ must navigate its relationship with the US, which has previously criticized the coalition’s supply cuts due to worries about gasoline prices.
