Major Oil Producing Countries Increase Production by Limited Extent Oil price prospects may remain firm

The Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers decided to increase the maximum
amount of production on the 2nd.
Market analysts believe that due to the decline in Russian oil supply due to sanctions, oil producers such as Saudi Arabia and the United States have limited production increases, while the northern hemisphere into the summer, oil demand is expected to rise, and the near-term and medium-term prospects for international oil prices remain firm
.

The effect of increasing production is expected to be limited

OPEC and non-OPEC producers held the 29th ministerial meeting by video on the 2nd, and decided to increase the average daily production in July this year by 648,000 barrels, higher than the previous monthly production increase plan
of 432,000 barrels per day.

According to the statement, the meeting reaffirmed the production adjustment plan approved by the 19th Ministerial Conference and the monthly production adjustment mechanism, that is, to increase the monthly production by an average of 432,000 barrels
per day from May this year.
The meeting also decided to distribute the share of the September increase in September ahead of schedule to July and August, so that the monthly production in July will increase by an average of 648,000 barrels
per day.

Since OPEC and non-OPEC producers only advanced the share of production increase originally scheduled for September to July and August, and due to the impact of sanctions, the new quota allocated to Russia may be difficult to achieve the expected effect, and many other oil producers are also facing varying degrees of difficulties in increasing production, and the actual effect of quota adjustment is expected to be limited
.

White House press secretary Karina Jean-Pierre welcomed
OPEC's decision to increase production growth in July and August this year on social media on the 2nd.
It is also reported that US President Joe Biden may visit Saudi Arabia later in June, when it is unclear
whether the United States can push Saudi Arabia to increase production by a larger margin.

Sanctions against Russia will exacerbate the imbalance between supply and demand

When the leaders of EU member states held a special summit a few days ago, they agreed on the sixth round of sanctions against Russia, announcing that they would immediately ban the import of 75% of Russian oil, with the temporary exception
of oil supplied through pipelines.
By the end of this year, the EU's oil imports from Russia will be cut by 90%.

International oil prices have not risen sharply again in the recent past due to the EU's sanctions agreement against Russia, but the market pressure caused by this move is expected to gradually become more prominent
.

Mark Heifer, global chief investment officer at UBS Group Wealth Management, said the EU has taken a gradual reduction in energy imports from Russia to avoid too much of a shock to current supplies
.
In addition, demand for Russia's discounted oil in other markets will support Russian oil exports in the near future, which means that the impact on the global supply and demand pattern in the short term may be limited
.

However, he believes that the impact of EU sanctions on Russia will be further manifested in the future, and in the long run, Russia's supply reduction will exacerbate the global supply-demand imbalance
.

Fitch, an international rating agency, said on the 1st that by the end of this year, Russia's average daily oil exports may be reduced by about 2 million to 3 million barrels
.
The supply gap left by Russia may not be fully filled
.

Energy demand is recently bullish

As the Northern Hemisphere enters the summer, oil demand is expected to grow significantly as people travel more activity, which will also support
oil prices in the near term.

According to data released by the American Automobile Union, the average price of conventional gasoline in the United States reached $4.
715 per gallon on the 2nd, a record high
.

Patrick Dehan, an oil analyst at Gasoline Partners, a U.
S.
refined product retail price information service, expects the average U.
S.
gasoline price could reach $
5 per gallon in mid-June.

According to data released by the U.
S.
Energy Information Administration on the 2nd, the U.
S.
commercial crude oil inventory last week was 414.
7 million barrels, down 5.
1 million barrels from the previous week, and gasoline and diesel inventories also fell
.

In addition, the United States has entered a six-month hurricane season, and severe weather and other unexpected factors may stimulate significant fluctuations
in oil prices.

Heifer said Brent crude futures are expected to remain supported in the near and medium term, reaching $115 a barrel by
June 2023.