OPEC to decide on oil production cuts today

The Organization of Petroleum Exporting Countries (OPEC) will hold a meeting on Tuesday, July 2 with its allies and Russia to decide on a production cut. Market participants are expecting that OPEC will decide to extend the oil production cut for another nine months period.

Apart from the supply cut from OPEC+ nations, the major impact that has disrupted oil supply is on account of the US sanction on Iran and Venezuela. However, despite the production cut decision from OPEC+ nations and the US sanctions, the oil prices have failed to remain at an elevated level which can be attributed to two macro factors.

One, though there is a production or supply cut from major oil producing countries, the 12 million bpd production from the US has ensured that there is no issue on the supply side. Another factor that has a strong influence on the oil price is demand for it, which is majorily dependent on how the world economy performs. In 2019, the IMF and the World Bank have lowered their growth forecast for the world economy.

The Brent crude oil has been quite volatile in 2019, the oil price at the start of the year was US$54.91 per barrel and in the second half of April it went above US$70, but failed to maintain that level and again cooled down to the present level of US$65 per barrel.