OPEC's suggestion of more oil drags markets lower

Cornelia Mascio
Mag 25, 2018

Meanwhile, commercial US crude inventories rose C-STK-T-EIA by 5.8 million barrels in the week to May 18, beating analyst expectations for a decrease of 1.6 million barrels, the Energy Information Administration (EIA) said on Wednesday.

Nuclear tensions between the countries added a risk premium to the price of oil earlier this year.

"It seems that the market is pausing at current levels".

"If prices get above there, that will further intensify and increase the likelihood that OPEC will do something". The commercial crude inventory remains in the lower half of the average range for this time of year.

Talk that prices could top that barrier over the next 12 months is gaining traction. Data was also published showing a sharp rise in American stockpiles. "With oil moving to $80, that has brought on the consumer demand". Higher prices are allowing an increasing number of shale oil producers to ramp up production, especially in the United States.

Despite record high USA crude production, the Organization of Petroleum Exporting Countries has succeeded in clearing the glut, according to the International Energy Agency.

"A 5.8 million-barrel build is kind of like a slap in the face, where it's like, 'Where did this oil come from?' And as you look through the numbers, it doesn't make a lot of sense", said Phil Flynn, analyst at Price Futures Group in Chicago. "No good and will not be accepted!".

Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA in Singapore, said that prices were getting some support from talk that Sinopec, Asia's largest refiner, would increase USA crude oil imports to a record high.

Saudi oil minister Khaled al-Faleh said at an economic conference in Russian Federation that a gradual output increase could happen in the second half of the year to prevent any supply shocks, according to the RIA Novosti agency.

"OPEC+ did a good job, the price of oil reached $80 per barrel".

Uncertainties about supplies from Iran and Venezuela have led prices to spike higher in recent weeks, with industry players warning they could jump to $100 per barrel. Those gains are now translating all the way along the oil futures curve, including contracts for delivery in late 2021, 2022 and 2023. The pact worked, with the oil markets now much more balanced, which has buoyed prices.

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