OPEC+ Meeting and U.S. Inflation Data Impact Oil Prices

Oil prices remained stable on Friday as investors awaited crucial U.S. inflation data to assess demand trends before turning their attention to the upcoming OPEC+ meeting on Sunday to evaluate future supply levels.

Brent futures for July delivery experienced a slight dip of 0.5% to $81.42 per barrel, while August futures saw a marginal increase to $81.96. This movement resulted in the spread between the two contracts reaching an 11-month low, entering contango for the first time this year. Meanwhile, U.S. West Texas Intermediate (WTI) crude stood at $77.88, showing a minimal decrease of 3 cents.

For the month, Brent is expected to record a decline of around 7% following a drop in the previous session due to an unexpected build in U.S. fuel inventories. Despite a deeper-than-expected draw in crude oil stocks, gasoline inventories surged by 2 million barrels, contrary to the anticipated 400,000 barrel draw. This surge was attributed to increased demand ahead of the Memorial Day weekend. Analysts from Citi highlighted that while there was strong travel activity during the holiday weekend, fuel consumption seemed subdued, indicating efficiency improvements.

In the euro zone, May witnessed a 2.6% rise in inflation, surpassing the 2.5% forecasted by economists. This uptick is not expected to deter the European Central Bank from reducing borrowing costs next week, although it could potentially slow down the rate-cutting process in the upcoming months. Recent concerns in the oil market have centered around the potential impact of prolonged higher borrowing costs, which could constrain funds and dampen oil demand.

Market participants are eagerly anticipating the OPEC+ meeting scheduled for Sunday, where discussions are ongoing regarding a possible extension of deep oil production cuts into 2025. Analysts from Commerzbank suggested that extending voluntary production cuts by OPEC+ could lead to a rise in oil prices, ultimately posing a risk of significant undersupply in the oil market during the third quarter.

As oil prices hold steady amidst market uncertainties, the upcoming OPEC+ meeting and U.S. inflation data remain critical factors shaping the future of the oil market. Investors are closely monitoring developments to gauge demand and supply dynamics, with potential implications for global energy markets in the months ahead.