Oil prices will likely face an increase in volatility over the coming weeks, heading into the OPEC meeting in June.
Sources close to the OPEC discussions detail that Saudi Arabia and some other OPEC oil producers are exploring an extension of the record high output cuts until the end of 2020, however, are yet to receive backing from Russia.
It followed last month, finally, after much of a saga The Organization of the Petroleum Exporting Countries and other producers led by Russia, aka OPEC+, agreed to cut output by 9.7 million barrels per day (bpd) in May and June.
As a recap, prices in oil collapsed in January-February, due to the Covid-19 global spread, forcing economic lockdowns and as a result, lack of demand for oil. In March, further intense selling pressure was observed, due to the failure of an agreement at the OPEC meeting, as Russia was reluctant to scale back their production.
What does this mean for oil markets?
Current production cuts are still not really enough to offset the huge drop in demand. If OPEC including Russia fails to explore deeper cuts and do not agree with something, then this could harm the recent recovery in prices. Should decent progress be made and they further scale back, then oil prices will continue to be supported.
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