After the beginning of the Middle East ceasefire, oil prices are now back to the levels they were before the conflict.
However, if you want to expand the supply of oil further, it could be a test.
Barbara Lambrecht said that the weekly US inventories report prevented further price declines because, for now, the US oil markets are still tight.
Next week will see two pivotal events that are sure to test the fragile equilibrium on the oil markets.
US-Iran Nuclear Negotiations and Tariffs
First, it is likely that the US-Iran nuclear talks will resume next week.
Future direction in the US is uncertain.
Although US President Donald Trump suggested that Iran needs its oil revenue for national reconstruction efforts, the US overall strategy is still not clear.
While he was maintaining “maximum” pressure on Tehran, he conceded China’s demand to purchase oil from Iran.
In a recent note, analysts at ING Group said:
If the ceasefire is maintained, it’s possible that the market will turn to another driver.
Howard Lutnick, US Secretary of Commerce, said that a trade agreement between China and the US, which was drafted in Geneva last month, had been finalized.
Lutnick expects that trade agreements with 10 major trading partners will be completed soon.
Analysts at ING said that the move was positive for the market and particularly before the deadline of 9th July, when reciprocal tariffs will be implemented.
OPEC+ meeting
Next week, the second crucial event is the gathering of the Organization of the Petroleum Exporting Countries (OPEC) and its allies. These countries have cut their oil production voluntarily.
Commerzbank’s Lambrecht said:
Expect them to increase their production by 400 000 barrels per day in August for the 4th consecutive month.
Kazakhstan is likely to have again exceeded its agreed-upon quota in terms of oil production.
Saudi Arabia, a leading producer, is reluctant to cut production unilaterally due to the lack of discipline in certain countries.
According to the Kazakh Energy Ministry, Kazakhstan is expected to see an increase in oil and condensate output of approximately 6% by June. This will bring it to 2,14 million barrels a day.
Kazakhstan will continue to exceed the amount agreed upon for an extra month.
Condensates are exempted from production limitations.
Lambrecht said that “however, given the fact that a continued increase in oil prices is most likely the general consensus of the market,” this will only have a slight impact on crude oil’s price.
ING analysts also echoed this tone, predicting that OPEC+ will continue aggressively to unwind production cuts in August and increase production by 411 000 barrels.
He said:
The oil market should be in a surplus by the end of this year as a result of these supply increases.
OPEC Production Figures
In June, the first estimates of OPEC’s production based on survey data will be released.
The estimates reveal how much OPEC+ increased their output.
The eight members of OPEC+ including Saudi Arabia, Russia and the kingpin, Saudi Arabia, have increased crude oil production by 411,000 barrels a day since May.
The cartel agreed at its most recent meeting to boost production in July by 411, 000 barrels per day.
OPEC+ produced less in May than it did in April. According to the International Energy Agency, this was because of production cuts in other countries, which were offset by increases from Saudi Arabia, and United Arab Emirates.
Lambrecht explained that “sentiment indicators, in addition to news about the supply, will focus attention on trends in demand: If sentiment in China improves as expected, it should help oil prices at least on a short-term basis.”
The post Oil Prices face litmus tests as US-Iran Nuclear Talks, OPEC Meeting to Shape Market Next Week may be updated as new developments unfold.
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