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OPEC+ extends cuts, but Macquarie says supply still set to outpace demand in Q2

Published 03/04/2024, 04:03 PM
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Investing.com -- OPEC and its oil-producing allies' decision to extend production cuts may provide a short term boost to oil prices, but oil supply is still expected to outpace demand in the second quarter as crude demand remains subdued and U.S.-led non-OPEC supply continues to rise.

"[T]he cut extension would still leave our global S&D balance in surplus in Q2," Macquarie said in a note, adding that the 2.2 million barrels per day of cuts delivered so far have shown "little effect" on aggregate OPEC supply. 

Russia and Saudi Arabia, who lead the Organization of the Petroleum Exporting Countries and its allies, or OPEC+, extended their output cuts of 2.2 million barrels per day until the end of June. 

Although the extension of cuts could provide additional momentum to an oil market showing signs of strength, Macquarie says tepid demand from refineries, which turn crude oil into products like gasoline, is expected to remain subdued through May ahead of a "material increase" in June.

The extension of crude output cuts from more compliant members of the group including Kuwait and Algeria -- that tend to follow the production curbs more closely -- would provide an additional, yet "modest" degree of tightening, Macquarie added, but less compliant members will likely have a bigger role in supply and demand outlook in Q2.

Output and compliance from this group "remain items to watch ahead of the next ministerial meeting, scheduled for June 1 in Vienna," it added.

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