OPEC+ Extends Oil Production Cuts to 2025: What It Means for U.S. Producers and the Global Market
Before you could say Jack Robinson, the ministers of OPEC+ wrapped up their short “meeting” on Sunday with a yallah and a tayyib and, to the surprise of no one, agreed to continue its oil production cuts into the year 2025. There wasn’t even any time for dessert baklava. The next meeting isn’t until December, so there won’t be much mystery on the supply side until then and, unless demand declines, there won’t be much of a force to build crude inventories unless supply comes from elsewhere. The hidden beauty for US producers is that the production cuts will set a theoretical floor price for crude and perhaps stimulate capital investment into the domestic production space, in lieu of all of the Pacman M&A activity we’ve been witnessing lately (eg ConocoPhillips is buying Marathon Oil in $22.5 billion deal). For the folks who boil the oil, a draw in U.S. crude inventories was offset by builds in gasoline and diesel stocks, putting a crimp on crack spreads. It could be time for refineries to take a well earned breather as utilization rates through 2Q are projected to be in the mid 90% range.
Friday, the Fed’s preferred inflation gauge, the core PCE Price Index, met consensus for April even though there was a greater than expected easing in consumer spending growth. However, the market recorded a loss for the week, breaking a 5 week winning streak. The only potential surprises this week will come on Friday with the May jobs report. A weak report could excite those who continue to cower from inflation. Despite growing leverage, investors continue to clamor for private credit, which has grown from $250 Billion in 2010 to about $2 Trillion in 2024. Double digit growth in this asset class in the years ahead is expected. How many more Red Lobsters are there to close down?
Congratulations to all of the people whose children graduated from college last month. Yes, it might have seemed like not long ago when they were littering your kitchen floor with Cheerios under the high chair and marking up the walls of your house with mud. The days are long but the years are short. Nice work mom and dad – and don’t forget the next meal is on them.
