Investing.com – A group of major oil producers are meeting this weekend to discuss future production levels, and RBC Capital Markets expects the cartel to present a united front and leave policy unchanged.
The Organization of the Petroleum Exporting Countries and allies including Russia, a group known as OPEC+, will meet online on Sunday, a change from the original in-person plan, to discuss their joint oil production policies.
The group is currently cutting production by 5.86 million barrels per day (bpd), equivalent to around 5.7% of global demand, in an effort to balance a market hit by falling demand, which will prices rise.
The cuts include 3.66 million barrels per day by OPEC+ members through the end of 2024, as well as another 2.2 million barrels per day of voluntary cuts by some members, mainly Saudi Arabia, set to expire at the end of June.
The move to forego an in-person meeting likely signals a “nothing to see” production decision until the end of the year, RBC Capital Markets analysts said in a May 28 note.
“We see no appetite at this point to add more barrels to the market and cause another price move to the downside. Current price levels are already causing several producers to take on additional debt and push back timelines for some high-profile projects,” RBC added.
“Adding more barrels at this time would likely create a suboptimal pricing environment that would not be offset by additional market share benefits.”
The bank sees less disagreement among key OPEC players and more closing ranks on the eve of this meeting as they try to deal with the geopolitical headwinds caused by the ongoing armed conflict in the region.
“As we noted last week, UAE President HH Sheikh Mohammed bin Zayed made a highly publicized visit to Saudi Arabia earlier this month to meet with HRH Crown Prince Mohammed bin Salman,” RBC added.
“In addition, it has been announced that the Saudi Crown Prince has accepted an invitation to Iran, a move that marks a major turnaround from 2016, when diplomatic ties were severed in the wake of the attack on the Saudi embassy in Tehran.”
The possibility of a deeper cut cannot be ruled out given recent oil price weakness, the bank said, “given HRH Prince Abdulaziz’s penchant for Hollywood twists. However, we tend to consider surprise announcements more likely when ministers meet in person and coalitions of the willing can be assembled at midnight meetings at the Park Hyatt.”
At 08:25 ET (12:25 GMT), futures (WTI) were trading 0.7% higher at $80.36 per barrel, while the contract rose 0.6% to $84.46 per barrel.
Both benchmarks are on track for losses between 2% and 3% this month.
