OPEC+ will meet on Sunday to discuss its outlook for oil production among member nations.
The meeting comes as Russia continues to pump cheap crude oil into the global market.
Tensions have risen as cheap Russian oil pushes crude below a key breakeven point for Saudi Arabia.
The upcoming OPEC+ meeting on Sunday could be a big moment for global oil production, with tensions growing within the cartel as the steady flow of cheap crude into Russia helps keep prices low despite promises to cut the production.
Sources told Reuters this week that the meeting is unlikely to result in further cuts, despite crude prices remaining under pressure even after steep production cuts in April. However, it is possible that Saudi Arabia will take a more assertive stance this weekend in response to a key supply dynamic that disrupts the cartel’s plans to drive up prices.
“The June 4 OPEC+ meeting should be crucial,” investor Louis Nevallier wrote in a note on Friday. “[R]Russia has been pumping increasing volumes of cheap heavy crude oil into world markets, which has undermined Saudi Arabia’s efforts to raise prices.” Nevallier said he expects a Saudi “very assertive” Saudi Arabia shows up at the meeting.
Russia continues to flood the market
Russia pledged in April to cut production by 500,000 barrels per day, but since then there has been little evidence that crude flows have fallen, and some customers are buying more Russian crude than ever. India, for example, is gorging on cheap Russian oil at record rates, and Russia has crushed OPEC’s market share in the country, even supplanting Saudi Arabia as the world’s top supplier. India.
But Russian streams don’t just revamp the list of top providers. They’re dragging prices below a key level needed by Saudi Arabia to fund big projects, and Riyadh is growing increasingly annoyed, according to a Wall Street Journal report this week.
The report says the country’s budget needs international oil prices to stay above $81 a barrel. Currently, Brent crude is hovering around $75.70 a barrel, even after prices rose in recent days as the US debt ceiling agreement neared the finish line and the US employment surprised on the upside in May.
With prices under pressure, sources say Saudi Arabia may demand further cuts on Sunday. But Russia is unlikely to accept this given that it already claims to be respecting the voluntary decision to cut production by 500,000 barrels a day earlier in the spring. He is also in dire need of money, as energy exports are his biggest lifeline to finance his war against Ukraine.
The June 4 meeting also comes at the start of the summer driving season for many countries. In the United States, gasoline prices rose about $0.03 a gallon over Memorial Day weekend as Americans hit the road.
After the previous round of OPEC cuts, analysts predicted the pain at the pump would be felt as the year progressed with millions of barrels per day pulled off the market. Any decision on supply this weekend could impact drivers for the rest of the year.
In April, analysts said they would brace for oil to rise to $100 a barrel in the latest round of OPEC cuts.
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