After touching a +3year high of c$80/b in May 2018, oil prices are trending southwards ahead of OPEC+1’s ordinary meeting scheduled for Friday 22nd June 2018. Brent prices settled at $74.9/b on Tuesday, down 6.3% since April 2018. The key concern for the market is the uncertainty surrounding the outcome of the June meeting amid conflicting interest from both oil producing and consuming economies in relation to fair market pricing.
On the supply side, Saudi Arabia, and Russia are pushing for a gradual relaxation of the production cuts accord in place since 2017 to forestall a likely market overheat. Meanwhile, other members of the group – Iran, Iraq, Venezuela and Algeria- are opposing a rapid increase in production. On the demand side, major oil consuming economies -US, China and India- want a fair-minded market pricing. India wants a preferential treatment, noting that rising oil price is a problem for India. President Trump continues to blame OPEC for high oil prices, pressuring S/Arabia to up production after the US renewed sanctions on Iran in May. Meanwhile, China has threatened a retaliatory tariff on US crude amid growing trade tension between both economies.
With S/Arabia and Russia in favour of an output increase, the Vienna meeting is likely to end with an agreement for marginal output increase.