//sli.reutersmedia.net/imp?s=126682800&li=&e=gjjtuyu768@gmail.com&p=35401584&stpe=pixel” width=”2″ height=”6″ border=”0″ />

//sli.reutersmedia.net/imp?s=126682801&li=&e=gjjtuyu768@gmail.com&p=35401584&stpe=pixel” width=”2″ height=”6″ border=”0″ />

//sli.reutersmedia.net/imp?s=126682802&li=&e=gjjtuyu768@gmail.com&p=35401584&stpe=pixel” width=”2″ height=”6″ border=”0″ />

//sli.reutersmedia.net/imp?s=126682803&li=&e=gjjtuyu768@gmail.com&p=35401584&stpe=pixel” width=”2″ height=”6″ border=”0″ />

//sli.reutersmedia.net/imp?s=126682804&li=&e=gjjtuyu768@gmail.com&p=35401584&stpe=pixel” width=”2″ height=”6″ border=”0″ />

Table of Contents

Power Up

By John Kemp, Energy Analyst

Welcome to Power Up. Ministers from the Organization of the Petroleum Exporting Countries and their allies led by Russia (OPEC+) are likely to hold their June 1 policy meeting online, multiple sources have told Reuters, setting the stage for a rollover in production levels and allocations. Bullish sentiment has evaporated over the last month and global oil inventories have not depleted as fast as expected at the start of the year. Prices, spreads and refining margins have already retreated. OPEC itself remains optimistic about demand. But ministers are likely to be cautious about boosting output when there is no immediate sign of the market needing more oil.

Top energy headlines

OPEC’s headquarters in Vienna, Austria. REUTERS/Leonhard Foeger

OPEC to stay the course

OPEC⁺ is likely to hold its June 1 oil policy meeting online, rather than in Vienna as currently scheduled, four OPEC⁺ sources have told Reuters.

The move online comes as the group is increasing seen extending its current production curbs until the end of 2024 rather than easing them.

OPEC officials have stuck to their very bullish forecast for oil consumption to rise by 2.25 million barrels per day (b/d) this year and 1.85 million b/d in 2025.

OPEC’s optimism about oil demand gives it justification to increase production rates to avoid over-tightening the market.

But it stands in marked contrast to the International Energy Agency’s more bearish predictions which see demand growing by just 1.1 million b/d in 2024.

The IEA cites weak consumption in the advanced economies from poor industrial activity, a mild winter and unfavourable views about diesel vehicles.

//sli.reutersmedia.net/imp?s=869486&li=&e=gjjtuyu768@gmail.com&p=35401584&stpe=static” border=”0″ style=”max-height:12px;” />

Global inventories remain close to the long-term seasonal average; there has been no sign of the rapid depletion expected earlier in the year.

Biofuels are taking an increasingly large bite out of U.S. diesel consumption, especially in California, leaving inventories looking very comfortable.

U.S. gasoline bulls have also been forced to retreat as stocks have stayed plentiful, with hedge funds selling the equivalent of 36 million barrels in the last four weeks.

The only threat to fuel availability comes from the Atlantic hurricane season, predicted to be more active than normal as El Niño gives way to La Niña.

The war risk that boosted Brent above $90 a barrel in April has mostly disappeared as the conflict between Iran and Israel has de-escalated.

As a result, the bullishness that characterised markets a month ago has unwound and prices, calendar spreads and refining margins have pulled back to levels last seen in January and February.

With sentiment no longer favourable, OPEC+ ministers are likely to adopt a cautious approach, avoid raising total production or re-opening the thorny question of production allocations.

Essential reading

Vietnam’s economy has boomed as it becomes an increasingly important manufacturing assembly centre and transshipment hub while the United States reduces trade with China by raising tariffs. The country’s trade surplus with the United States has more than doubled to $105 billion and is the fourth highest after China, Mexico and the European Union. For now, the U.S. government has downplayed the problem. But that could change after the U.S. presidential election in November.

U.S. gasoline bulls have been forced to retreat after the expected drawdown in stocks failed to materialise. Prices and refining margins have slumped while hedge funds have sold the equivalent of 36 million barrels since early April. Fuel supplies are likely to remain comfortable this summer. The main risk comes from an active hurricane season.

U.S. coal-fired generators supplied over 15% of electricity in the first four months of the year and are playing a critical role ensuring reliability despite widespread efforts to transition energy systems away from fossil fuels. Summer heatwaves are likely to push that share even higher, especially in Texas, where the grid relies heavily on coal to meet air conditioning demand.

PetroChina forecasts the country’s liquefied natural gas (LNG) imports could hit a record high of 78-80 million tonnes in 2024. Growth is being driven by the industrial recovery in the chemicals, paper, steel and cement after the disruption caused by the coronavirus epidemic. But LNG prices remain too expensive for much additional demand from power generators.

Germany’s solar generators supplied more than 60% of the country’s total electricity at times this month during a long stretch of clear and sunny skies. Rapid deployment of solar generation has played a key role improving energy security in the country most exposed after Russia’s invasion of Ukraine.

India’s oil consumption is being driven by rising household incomes and the increasing ownership of motorcycles and cars rather than industrial deepening. Consumption increased by around 220,000 bpd in the first four months of 2024 compared with a year ago, but the increases are weighted towards gasoline rather than diesel, a sign of the government’s challenges at it tries to boost the domestic manufacturing base.