OPEC is holding a meeting on oil production cuts tomorrow

OPEC and its allies intend to meet on June 6  at 12:00 GMT via a webinar. The intention is to finalize the terms of extending 9.7 million b/d production cuts through July. 

Russia and nine other allies will join the meeting at 14:00 GMT. 

A delegate-level OPEC+ technical committee, co-chaired by Saudi Arabia and Russia, will meet on June 5 to discuss market conditions and review the agreement.

The OPEC+ alliance is expected to extend the cuts through July

Without an extension, the coalition will likely keep the production cuts at the level of 9.7 million BPD. It has been the most substantial coordinated supply accord in the market’s history. The reductions will roll back to 7.7 million b/d starting July 1 through to the end of 2020. But the uncertainty of the global economy, as it takes its first tentative steps towards a recovery from the COVID-19 pandemic, has made members agree that continuing with the deeper cuts is reasonable.

Saudi Arabia and Russia, the two largest OPEC+ members, and its de facto leaders had been pressuring Iraq and other frequent violators of reduction quota, such as Nigeria and Kazakhstan. They urged these countries to improve their performance and also implement extra cuts in the coming weeks to make up for their excess production.

Crude oil could increase by 90% because US companies have over-cut their production

Dan Eberhart is a chief executive of Canary Drilling Services, an oil drilling company. He stated that the US oil market is about to experience a mini supply shock. He believes that the US crude oil prices are likely to rise by over 90% to $70 a barrel since the country has over-cut production.

Many of the shale producers in the US are starting to reopen their shut-in wells. For many of them, it is a necessity. The longer a well stays closed, the higher the danger of losing production. When storage facilities are full again, production will be returning. 

Demand for the commodity can not recover this fast; however, it is still improving. Lockdowns are being lifted in Europe, Asia, and North America. According to the Energy Information Administration, China’s demand for the commodity has recovered to 90% since refinery runs have increased. 

For two weeks till now, gasoline and distillate fuel inventories have been growing. The latest weekly data revealed that gasoline demand has increased by 2.8 million barrels, and distillate fuel stockpiles have seen a 9.9 million barrel increase.