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Energy Markets Watch: Epic OPEC Edition

Contributed By: Robbie Fraser, Commodity Analyst | Schneider Electric Energy & Sustainability Services

June’s Markets Watch arrives in a virtual barrel of oil since OPEC-related meetings dominate the news and notes this month. In late June, OPEC takes center stage (maybe) with a meeting that may or may not happen, and if it does, it might also be followed by a related meeting. If they meet, good topics. If they don’t, bad optics. (Wordplay!) Probably best to stay tuned to see how this all shakes out.

As far as we know, the EIA Petroleum reports will be released as scheduled four times this month and the G-20 meetings seem like a sure bet, too.

June 5, 12, 19, 26: EIA Petroleum Status Report

The EIA’s weekly oil reports have taken on some added importance of late amid a string of data that has surprised markets and rocked oil prices. Even with talk of geopolitical risk from countries like Venezuela and Iran, the EIA’s weekly oil numbers have consistently shown U.S. crude, gasoline and diesel inventories rising in recent weeks.  That’s a clear signal to the market that the supply/demand balance is tipped in favor of oversupply.  As that trend has continued, it has played a major role in pulling prices lower. As long as crude and product stocks keep rising, expect crude prices to feel the pressure through the month ahead.

June 25: OPEC Meeting (maybe)

Formal OPEC meetings are typically bi-annual events that command serious market attention. While U.S. shale has held cartel power in check, the group still controls roughly 1/3 of global oil production. As a result, decisions on any production changes can have significant price implications for crude oil, refined products and connected energy prices. This year, the topic at hand is whether current production cuts should be extended.

As if that topic wasn’t difficult enough to produce unanimous agreement, the group can’t even seem to agree on the meeting date. Non-OPEC member, Russia, has spearheaded requests to postpone meetings until July, but that’s been contested by several of OPEC’s struggling members. Ultimately, the meeting is sure to be the key event to watch this month – if it actually happens as scheduled.

June 26: OPEC & Non-OPEC Meeting (maybe)

OPEC may have seen better days, but they’re not opposed to reinventing themselves. The group’s latest cuts have been boosted by an alliance with a number of non-OPEC countries – most notably Russia. If Saudi Arabia is the de facto leader of the OPEC group, Russia is undoubtedly head of the non-member states, with those two countries alone accounting for more than 20% of global oil production. As a result, it’s arguably Saudi’s negotiations with Russia, rather than the rest of the cartel, that will have the greater market impact. Saudi appears to be all-in on extending cuts and boosting prices, but Russia is less enthusiastic. If they can’t agree on a path forward, expect oil prices to drop.

June 28-29: G-20 Meetings

A gathering of leaders from the world’s most powerful economies always brings the potential for market impact, but this round has higher stakes than usual. Sure to be on everyone’s mind, the U.S. push for trade barriers with top trade partners such as China and Mexico has the global economy on edge. G-20 will offer a prime opportunity for those leaders to voice their opinion, and for new direct negotiations between the U.S. and China, among others. If those talks ultimately point to a trade deal breakthrough, economic forecasts are likely to shift higher. That outcome would trigger increased expectations for energy demand that could boost energy market prices, as well.

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