Oil Prices Weaken Despite Geopolitical Risks, OPEC+ Meeting in Focus

Oil Price Stagnation: The market has spent the last two weeks in a sideways range, finding resistance at $80 and support at $77. Oil prices retested the $80 level during yesterday’s session but were unable to break through, returning to the consolidation range of the past two weeks. Crude oil is down 4.27% since the start of May, though it remains up 10% since the start of the year.

Oil Price Factors: Prices continue to decline as investors weigh the impact of U.S. inflation, soft global demand, and ample supply, while geopolitical events have had little immediate impact on the market. All eyes are on the upcoming OPEC+ meeting for further direction on output policy.

Investor Sentiment: Investors expect prolonged U.S. inflation and interest rates to reduce consumer and industrial demand. U.S. Federal Reserve officials have stated they are waiting for more signs of slowing inflation before considering interest rate cuts.

OPEC Supply Decisions: Attention is on the upcoming Organization of the Petroleum Exporting Countries (OPEC) meeting on June 1^st, where members will decide on extending voluntary output cuts. There is growing anticipation that OPEC will extend output cuts until the end of the year to maintain market stability.

Geopolitical Tensions: The death of Iran’s president in a helicopter crash has created political instability in the Middle East. Concerns about the health of Saudi Arabia’s King Salman bin Abdulaziz are further adding to the geopolitical worries in the region.

Supply Risks: An oil tanker heading to China was hit by a Houthi missile, raising fears of supply disruptions, while continued drone attacks on Russian oil refineries further complicate the geopolitical landscape.

U.S. Inventories: The current increase in U.S. oil inventories is expected to reverse as production growth slows and seasonal demand rises in June. This reversal will likely support higher oil prices in the weeks ahead. 

U.S. Seasonal Demand: U.S. gasoline consumption is expected to rise during the summer driving season. Historically, driving activity increases during this period, leading to higher fuel demand. This seasonal uptick is anticipated to counteract the current low consumption levels.

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