Oil prices continued to face a downward trend on Wednesday, influenced by global economic instability concerns and preceding a significant meeting scheduled for Sunday, with contradictory indications about production from two primary contributors.
Brent crude saw a 2.2% decrease to $72.11, while West Texas Intermediate dropped 2.3% to $67.91 on Wednesday.
The forthcoming meeting in Vienna on Sunday will bring together the 13 Opec members and ten additional oil-producing nations, collectively known as Opec+, to determine production strategies.
A production cut was decided by the oil cartel in April, set to last until the end of the year to support oil prices.
Last week, hints towards another possible cut came from Saudi Arabian Energy Minister Prince Abdulaziz bin Salman, Opec’s de-facto leader, in an interview with Bloomberg.
However, contradictory reports came from Russian Deputy Prime Minister Alexander Novak, who expressed no expectation for new measures from Opec+ in Vienna, according to Russian media outlets.
RBC Capital Markets considers that the two possible policy decisions involve a deeper cut or maintaining the current course.
The brokerage stated: “Despite the robust Russian output and their growing influence in Asian markets, we do not foresee a return to the supply surge of March 2020 at this point.”
Last week, no clear decision was reached as key players waited for significant events to unfold, including US debt ceiling discussions, according to RBC.
The brokerage added that the prevailing inclination of Opec’s leadership appears to be towards active management and ensuring macroeconomic challenges or deteriorating market sentiment do not completely overwhelm the group.
RBC also stated they do not believe that Saudi Arabia is sufficiently upset by the loss of market share in Asia to re-engage in a production conflict with Moscow, similar to that of March 2020.
Stephen Innes of SPI Asset Management questioned if a potential June intervention could alter the projected decline in oil prices over the upcoming months, given the previous surprise cut in April output.
He highlighted that Russian oil remains an unpredictable factor in the oil market.
Despite the possibility of Opec complying with further cuts, Innes believes the uncertain dynamics around Russian supply present a bearish risk for oil.
Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, emphasized that potential internal discord could arise if Russia decides not to comply with Opec’s output reductions, limiting Opec’s ability to control oil prices.
While she doubts that a disagreement on the scale of the 2020 conflict would reoccur due to the strengthened alliance between the two countries following the Ukrainian war, she mentioned that any Russian opposition could significantly weaken Opec’s influence on oil prices.
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