OPEC+ expected to extend supply cuts to stave off a global surplus and shore up prices

OPEC+ is expected to prolong oil output cuts into the second half of the year as it seeks to stave off a global surplus and shore up prices.

Saudi Arabia and its partners have been keeping roughly 2 million barrels-a-day offline this year, and will meet on June 1 to consider whether to continue. Crude prices soared last month on fears that conflict in the Middle East could disrupt oil supplies, stirring talk that OPEC+ might revive output to calm the market.

But 87% of traders and analysts surveyed by Bloomberg predict that the Organization of Petroleum Exporting Countries and its allies will extend the curbs, potentially to the end of the year. 

“OPEC+ will want to see evidence of sustained tightness in oil markets before starting to add supply, so there’s a good chance they will decide to extend,” said Richard Bronze, an analyst at Energy Aspects Ltd. “The discussions will not begin in earnest until closer to the meeting date.”

Oil prices have retreated close to a six-week low near $84 a barrel in London as traders shrug off hostilities between Iran and Israel, while the market outlook darkens amid faltering growth in China, and abundant crude supplies from the US, Brazil and Guyana. 

The price retreat could offer some relief for consumers and central banks grappling with stubborn inflation, and even for President Joe Biden as he campaigns for re-election with gasoline prices never far from the political agenda.

Yet it’s a concern for many of the 22 OPEC+ nations. 

Group leader Saudi Arabia needs prices near $100 a barrel, the International Monetary Fund estimates, as Crown Prince Mohammed bin Salman spends lavishly on futuristic cities and top-flight sports players. Co-leader Russia also requires revenues as President Vladimir Putin continues to wage war on Ukraine. 

Price Pressures

If OPEC+ relaxes the supply restraints, world oil markets could tip back into surplus, according to the International Energy Agency in Paris, adding to the pressure on prices. The supply picture will only tighten up if OPEC+ continues to act, Shell Plc Chief Financial Officer Sinead Gorman said on Thursday.

Twenty-six of 30 survey respondents forecast that OPEC+ would persevere, and eight