Oil prices are hovering around $85 per barrel, showing a slight rebound after a recent slump. However, despite this uptick, OPEC+ is unlikely to raise production levels. The current trading month is expected to be more stable with prices ranging between $80-$90 per barrel, a range that OPEC+ finds acceptable. The group has extended its production cuts until the end of June, aiming to keep crude prices elevated while supporting the market.
As of Friday, May 10, the Brent front-month futures contract was up to $83.97 per barrel, while the West Texas Intermediate was trading at $79.36 per barrel. These levels are expected to be maintained throughout the month, driven by macroeconomic data and supply-demand fundamentals. OPEC+ is looking for a balance in oil prices, seeking a level that is high enough to support their economies but not so high that it causes demand destruction.
The group’s next meeting is scheduled for June 1, and it is unlikely that there will be any changes to the current production cuts. While OPEC+ aims for oil prices to remain elevated, it also understands that excessively high prices could have negative consequences. A price range of $80-$90 per barrel seems to be the sweet spot for OPEC+ at the moment, allowing them to control the direction of crude oil prices while avoiding extreme inflationary impacts.
Oil prices have remained strong this month due to significant draws on commercial crude inventories, particularly in the United States. Optimism about potential U.S. interest rate cuts by the Federal Reserve has also contributed to price gains. As the Fed monitors job data and first-quarter GDP figures, there is speculation about a possible interest rate cut. This sentiment is weakening the dollar and making commodities, especially oil, more attractive to traders.
The stability in the oil market, with prices remaining in the $80-$90 range, gives OPEC+ a level of control over crude oil prices. Despite increasing non-OPEC production, the group’s large spare capacity allows them to influence prices both upwards and downwards. Given the current macroeconomic uncertainty, OPEC+ is unlikely to make any changes to production levels at their upcoming meeting in June. The group is content with the current price range, which allows them to maintain stability while supporting their economies.
