OPEC+ Virtual Meeting Set To Review Production Policy Amid Global Market Dynamics

On Sunday, OPEC+ will hold a virtual meeting to review its production policy. The consensus is that OPEC will not announce any new output cuts, primarily because the meeting is virtual. Traders wait to determine if OPEC will extend production cuts to the end of June.

OPEC said on Friday that the meeting, originally scheduled for June 1st in Vienna, will now be held online a day later.

Oil prices gained more than $1 per barrel last Tuesday on expectations that OPEC+ will maintain crude supply curbs at its June 2nd meeting, while the start of U.S. summer driving season and a weaker dollar also boosted the commodity. The continuing conflict in the Middle East also helped to boost oil prices.

The group began cutting outputs in November 2022 amid weakened demand due to China's economic slowdown. It deepened the output cut in July 2023, with Saudi Arabia reducing its production by 1 million bpd and Russia pledging to cut its supply by 300,000 bpd. By March 2024, the total output cut by the organization amounted to 5.9 million bpd, or around 5.7% of global demand.

An OPEC report shows that the increase in oil supply in 2024 is expected to come primarily from the US, Canada, Brazil, and Norway. According to International Energy Statistics, oil production in the United States rose for the sixth consecutive year to an average of 12.9 million bpd in 2023, accounting for 12.5% of the global demand.

The Memorial Day holiday on Monday signals the start of the peak demand season in the US, the world's biggest oil consumer. Maintaining production cuts should keep prices supported as consumption rises.

According to the IEA, China accounted for 80% of oil consumption among non-OECD countries, making it the world's largest oil importer. China imported 11.3 million bpd of crude oil in 2023, a 10% increase from 2022, according to China customs data. However, the country's demand is expected to weaken, with its share shrinking to 43% in 2024 and 27% in 2025 due to a slowdown in economic growth and the transition to green energy. China's rapid transition to electric vehicles and high-speed trains may significantly impact crude oil demand.