Oil on track for weekly gains as traders assess potential for more OPEC+ production cuts

by News Room

May 26, 2023

in Futures

Reading Time: 2 mins read

Oil futures rose Friday, on track for weekly gains, as investors weighed prospects for further cuts in crude production when the Organization of the Petroleum Exporting Countries and its allies meet next week.

Price action

West Texas Intermediate crude for July delivery
CL00,
+0.90%
CL.1,
+0.90%

CLN23,
+0.90%
rose 40 cents, or 0.6%, at $72.32 a barrel on the New York Mercantile Exchange.
July Brent crude
BRNN23,
+0.67%,
the global benchmark, was up 21 cents, or 0.3%, at $76.47 a barrel on ICE Futures Europe. August Brent
BRN00,
+0.75%
BRNQ23,
+0.75%
was up 26 cents, or 0.3%, at $76.44 a barrel.
Back on Nymex, June gasoline
RBM23,
+0.77%
rose 0.6% to $2.69 a gallon, while June heating oil
HOM23,
+1.08%
added 0.5% to $2.359 a gallon.
June natura gas
NGM23,
-1.91%
was down 2.3%, on track for a weekly tumble of nearly 13%.

Market drivers

WTI and Brent were on track Friday morning for weekly gains of around 0.8% and 1.2%, respectively. Crude was lifted earlier this week after Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman warned that oil short sellers should “watch out,” threatening a rerun of the price spike that occurred after OPEC+ output cuts were announced in early April. Analysts took the remarks as a threat that more output cuts may be in store.

See: Top Saudi official says oil speculators had better ‘watch out’

However, on Thursday, Russia’s deputy prime minister, Alexander Novak, appeared to pour cold water on prospects for further reductions in remarks to a Russian newspaper, Reuters reported. OPEC+ ministers are slated to meet June 4 in Vienna.

OPEC+ countries in early April announced around 1.15 million barrels a day in production cuts that took effect at the beginning of this month, while Russia pledged to continue cuts of 500,000 barrels a day through year-end.

Further cuts appear unlikely since the latest round of reductions came into force only at the beginning of May, said Barbara Lambrecht, commodity analyst at Commerzank, in a note.

“Nonetheless, the production cut is not off the table yet, which should lend support to prices for the time being,” she said.

Lambrecht said that survey-based estimates by news agencies of OPEC production for May are likely to confirm a reduction of around 1 million barrels a day is being consistently implemented, which means the market is likely already undersupplied.

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