Oil: OPEC meet to drive the prices – BBH

Analysts at BBH suggest that OPEC meets on May 25 and will be significant for oil prices moving forward as the issue is whether to extend the six-month output cut agreement or to make even deeper cuts.  

Key Quotes

“Saudi Arabia and Russia reportedly will back extending the existing cuts for nine months.  Recall when the output restraint was announced, it was thought that six months was all that was needed to bring supply and demand back into equilibrium.  Now the thinking that six months is only about 2/5 of the time needed.  OPEC could "surprise" the market by agreeing to deeper output cuts.  More than half the output cuts have been offset by increased output from the US and other non-OPEC countries.”

“The July Brent and light sweet crude oil futures settled at their best levels in a month before the weekend.  Brent had been capped ahead of $53 most of last week before punching through it in the last trading session.  The next technical target is seen near $55.  The July light sweet crude contract closed above the $50 threshold for the first time since April 20, and is also poised for additional gains.  The US rig count rose for the 18th consecutive week, according to Baker-Hughes.  However, for the first time since February, US output fell on week-to-week basis.  The reelection of the Rouhani as President of Iran represents a continuation of policy, whereas if the more conservative Raisi had, it would have been seen as more favorable oil prices.”