Following the news that OPEC+ members have agreed to raise oil production by 432,000 barrels per day, Jamie Maddock, equity research analyst at Quilter Cheviot, comments:
“The members of OPEC+ today agreed to raise production by just over 400,000 barrels per day in May, which was in line with expectations. The cartel sees the market as well-balanced and the current price volatility reflects geopolitical developments so they have been reticent to react in a way that could be seen as kneejerk.
“The most recent data implies the oil market is, however, under-supplied to the order of 1 million barrels per day and while an imbalance of supply and demand will remain, the market should come back into balance around midyear assuming further OPEC+ production increases. This might just help stabilise oil prices during what has been a very volatile first quarter, but will do little to suppress the oil price – an outcome many developed governments would like to see as cost of living increases squeezes consumers.
“The wildcard in all of this is Russian oil. The impact of European nations trying to wean themselves off of Russian oil has yet to be fully assessed but given the scale of the issue for some nations it could delay the supply re-balancing until towards the end of the year.
“This means that unless there is a swift resolution to the conflict in Ukraine, oil prices are likely to remain elevated throughout the year with the potential for further oil price spikes increasing. The pain at the petrol pumps won’t be alleviated for some time to come.”