Lack of unexpectedness during OPEC+ meeting can support Brent crude

Brent crude prices continue to retreat from their May highs, but local lows around $62.80 are holding back sellers' activity. The upcoming OPEC+ meeting tomorrow is encouraging traders to avoid making sharp moves. The market has already priced in the expectation of another increase in fuel production, and upon confirmation of this information, short position holders may start taking profits. This scenario will support a return of Brent oil prices to $66.5.

Nearly all leading news agencies, including Bloomberg and Reuters, forecast that OPEC+ will ease production quotas by an additional 411,000 barrels per day (bpd) at its next meeting. This would bring the total permitted production increase since spring to 1.37 million bpd. However, this target is unlikely to be met in practice. The reason lies in the need to compensate for previous quota violations.

According to Bloomberg, the actual increase in OPEC+ oil output will stand at approximately 1.11 million bpd. Iraq and Kazakhstan, which have frequently exceeded their permitted production quotas, will struggle to sharply raise these figures further. Additionally, higher production volumes do not guarantee a corresponding expansion in global supply. Saudi Arabia and other Middle Eastern nations may burn up to 80% of additional extracted crude for electricity generation during summer heatwaves, limiting available export volumes.

There are other reasons for the lack of significant growth in global energy resource supplies. For example, oil field operations in Canada will traditionally be hampered by forest fires in the coming months. In the United States, local companies have already reduced new well drilling due to unprofitability at current crude prices. Active shale oil development requires quotes to come closer to $70.

As long as Brent prices remain above $62.80, there is a good chance of an upward reversal and further attainment of the $66.5 level.

Consider the following trading strategy:

Buy Brent in the range of 62.8–64.5. Take profit — 66.5. Stop loss — 61.