In brief
- Saudi Arabia’s energy minister says OPEC+ is waiting for central bank interest rate action before considering energy demand.
- Expectations have grown about how many rate cuts global central banks will make.
Saudi Arabia’s energy minister says OPEC+ is waiting for central bank interest rate action before considering energy demand.
“Central banks, with all respect, they’re flip-flopping [on their messaging],” Prince Abdulaziz bin Salman said during a Sunday press briefing when asked if OPEC+ supply cuts could reinject inflationary pressures worldwide at a time when central banks are limiting consumer price increases and shyly considering cutting interest rates.
OPEC+, which includes the Organization of the Petroleum Exporting Countries and its allies, extended output cuts until next year on Sunday. A coalition subset will extend two more voluntary supply reduction layers: This subgroup of eight countries will maintain a 1.7 million barrels per day tranche through 2025 and a 2.2 million barrels per day decrease until the third quarter.
In the May Monthly Oil Market Report, OPEC anticipates 2.25 million barrel-per-day demand growth, prompting output plan decisions. The start of the summer driving season and the conclusion of Chinese refinery maintenance will also increase crude demand.
Russia’s full-scale invasion of Ukraine exacerbated the economic collapse after the COVID-19 epidemic by raising energy prices worldwide. Global entities have linked energy prices to inflation. Increasing inflation has slowed oil demand.
Expectations have grown regarding the timetable and number of rate decreases by global central banks, whose nations face persistent inflation. Even though euro zone inflation rose to 2.6% in May from 2.4% in April, the European Central Bank is expected to cut rates at its June 6 meeting.
The U.S. Federal Reserve was expected to ease policy in the immediate term, but stronger-than-expected economic data and policymaker comments dimmed those hopes.
While ambivalent, Saudi Arabia’s Abdulaziz bin Salman said, “Show me any central banker who [has] a determination to give people a trajectory of when, where, and how they are going to bring interest rates down.” The group wants “more certainty on the overall economic trajectory that will probably cause demand to increase with a clear path.”
The OPEC+ coalition has frequently pledged to respond quickly and adaptably to oil market shifts. The Saudi energy minister said Sunday that the alliance’s fresh production strategy is market-driven.
He stated, “As it is today, we believe that this thing requires us to give the market clarity on what signals we are issuing, and it is paramount for people to take an example of what we are doing.”
Source : CNBC News
