Analyst says OPEC unlikely to open oil taps in June

As a result of the Organisation of Petroleum Exporting Countries’ (OPEC) keen observation of ongoing geopolitical events that could impact broader global growth, it probably won’t decide in June to bring back more oil supply, David Lennox, resources analyst at Fat Prophets said Tuesday.

Reports that Russia and Saudi Arabia are considering increasing oil production to ‘ease supply concerns and market anxiety’ sent oil prices plummeting last week, ending Monday at their lowest since May 8.

Talk of OPEC possibly discussing bringing back some production as soon as the June meeting in Vienna has only grown in the past few days.

“They probably won’t do anything in June, they’ll just stay pat at this point of time, because there are a lot of other geopolitical events going on around the globe that could have an impact on broader global growth,” Lennox told CNBC.

They will probably “sit pretty much pat”, but they will continue with the rhetoric “we are watching very closely” the market and the oil price, the analyst noted, referring to OPEC.

If OPEC, however, sees Brent Crude persistently getting higher toward the $80 a barrel region, the cartel perhaps would take some action to bring more supply, but this won’t happen in June—it would take place in one of the following meetings, Lennox told CNBC.

Fat Prophets are keeping their year-end target on Brent at $74 to $84, because a really strong driving season in the U.S. could perhaps make up for some of the possible slack on the supply side, Lennox said.

The market is currently focused on the supply side, but demand factors with the summer coming in the northern hemisphere will perhaps help strengthen oil prices, according to the analyst.