Yesterday oil prices rose, ahead of the upcoming OPEC+ meeting.
The members of the OPEC+ alliance are meeting to discuss extending their output cuts of 9.7 million barrels per day, which is equivalent to around 10 percent of the world's production. Oil markets have been struggling as of lately because of a global imbalance between oil supply and demand, so there is a need to keep the oil prices under control.
Analysts expect the supply cuts to be extended until September 1, if the OPEC+ members actually reach on an agreement. Some foresee an opposition from Russia, which in the past has disagreed with the organization, while others highlight the lack of compliance of countries like Iraq and Nigeria, which are facing a more complex economic situation due to the fading oil revenues, compared to richer oil producers.
“Russia will be the key obstacle in any extension, and they are unlikely to agree on any extension which goes beyond a couple of months,” claimed an analyst at Dutch bank ING.
Nevertheless, Reuters reported yesterday that according to two OPEC+ sources that the OPEC and Russia are moving towards an agreement. At the moment, according to the claims, both were negotiating a month or two months extension. The media has been reporting that Saudi Arabia is aiming for a longer extension, at least until the end of the year.
The meeting, which was originally scheduled to take place next week, is set to happen on June 4. If the current agreement, which is set to expire at the end of this month is not extended, oil prices could fall dramatically. In any case, according to some analysts, it is highly unlikely that an agreement will aid the oil price performance.
Brent oil futures advanced 1.75 percent yesterday, while West Texas Intermediate oil futures added 0.48 percent. By 6:15 GMT WTI crude oil futures advanced 0.56 percent, hitting the 35.64 level, while Brent oil futures added 0.70 percent, at 38.59.
Australian Central Bank Keeps Cash Rates Steady
Right after its monthly meeting, the Reserve Bank of Australia announced its decision to keep cash rates unchanged at 0.25 percent, a move that was highly expected by analysts.
According to RBA Governor Phillip Lowe, the bank is willing to do whatever is needed to support the Australian economy, particularly to make credit available to households and businesses as well as keeping borrowing costs low. The bank is also pledging to keep its approach as long as it's needed, signaling that it is prepared to increase its bond purchases in order to ensure the bonds markets keep functioning.
Regarding the current economic situation, Lowe commented that the world's economy is now experiencing a severe downturn. The current fiscal and monetary measures are probably going to be required for some time, highlighting that they are effective. He also remarked that the economic outlook remains highly uncertain, adding that the pandemic is expected to have long-lasting effects on the economy.
"The Australian economy is going through a very difficult period and is experiencing the biggest economic contraction since the 1930s," commented Lowe, adding that it's possible that the depth of the downturn will be less than expected,
By 6:38 GMT the Australian Dollar advanced 0.05 percent against the greenback, hitting the 0.6801 level.