Oil prices mixed ahead of OPEC+ meeting as investors weigh more output cuts

oil prices Saudi Arabia's Minister of Energy Prince Abdulaziz bin Salman Al-Saud arrives for an OPEC meeting in Vienna, Austria, June 3, 2023. Photo: Reuters.
Saudi Arabia's minister of energy Prince Abdulaziz bin Salman Al-Saud. Saudi Arabia may extend cuts at the next OPEC+ meeting to keep oil prices higher to help support its economy Photo: Reuters. (Leonhard Foeger / reuters)

Oil prices were mixed on Tuesday afternoon reflecting cautious trading with supply concerns continuing to weigh on investors ahead of the next OPEC+ meeting on Wednesday.

Crude oil, or West Texas Intermediate (CL=F), rose 0.23% to trade at $89.05 (£73.79) a barrel, while Brent crude (BZ=F) was down 0.19% to $90.53 a barrel, lower but still hovering around the $90 level.

Craig Erlam, senior market analyst at OANDA, noted the early session slide in prices as Brent continues to trade lower.

“While the rally was already running on fumes prior to the pullback, it is interesting the scale of the move we've seen in recent days, with Brent off more than 5% since Thursday,” he said.

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“Perhaps there's an element of profit-taking ahead of the OPEC+ meeting after such a strong rally since mid-August or maybe risk-aversion elsewhere is weighing, driven by economic fears. The question now is whether trading in recent days or the recent shift in risk appetite will influence the outcome of the meeting.”

What to expect from OPEC+

Last week, oil prices soared to their highest level this year as Saudi Arabia and Russia supply cuts kept feeding into stronger oil prices, with the markets now expecting the cuts to be extended into 2024.

Saudi Arabia may extend cuts at the next OPEC+ meeting to keep oil prices higher to help support its economy, which is already in a recession since its mining sector activity dropped by more than 25% on a year-to-year basis.

Meanwhile, members of OPEC+ have been in attendance at an energy conference in Abu Dhabi where higher oil prices were widely discussed.

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The secretary-general of OPEC, Haitham Al-Ghais, said on Monday that the group is optimistic on demand and sees under-investment as a risk to energy security.

“We are...running quite low on spare capacity; we have said this repeatedly and this requires a concerted effort by all of the stakeholders to see the importance of investing in this industry,” he said.

The UAE’s energy minister Suhail Al-Mazrouei echoed the call and said investment by both international and national oil companies was needed.

If OPEC does go ahead with further cuts on Wednesday it is likely to negatively impact consumers, especially for gasoline and transportation costs.

Rising oil prices could also impact the monetary policy paths of central banks as they try to curb inflation.

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