Oil Prices Rise As OPEC Plans Supply Cut

Cornelia Mascio
Giugno 13, 2019

FILE PHOTO: A pumpjack is seen at the Sinopec-operated Shengli oil field in Dongying, Shandong province, China January 12, 2017.

Prices fell by around 1 per cent in the previous session and crude futures are down by some 20 per cent from their 2019 peaks in late April, dragged lower by a widespread economic downturn that has started to impact oil consumption. Brent and WTI crude prices rose to $63.29 and $53.99 per barrel respectively.

United States crude inventories rose by 4.9 million barrels in the week ended June 7 to 482.8 million barrels, according to data from the American Petroleum Institute (API) on Tuesday. Energy consultancy FGE said global crude demand growth could drop below 1 million barrels per day (bpd) in 2019 from the 1.3 to 1.4 million bpd expected previously.

Al-Falih also stated that he's unwilling to engage in a race to increase oil output in order to compensate for lower prices and that a return to the price-crash environment of 2014-15 is unacceptable.

Concern about slowing demand and economic growth has had a large impact on sentiment amid a trade war between the US and China.

Hedge fund managers are liquidating bullish oil positions at the fastest rate since the fourth quarter of 2018.

The Organization of the Petroleum Exporting Countries and some non-members, including Russian Federation, have withheld supplies since the start of the year to prop up prices.

Meanwhile, Russia's Energy Minister, Alexander Novak, was quoted to have said the country is not ready to commit to further production cuts under an OPEC/non-OPEC supply accord, with the oil market facing many uncertainties in the months ahead.

Oil prices rebounded slightly at the end of the week on the news that OPEC+ will probably continue its output cuts throughout the year.

"The sell off in recent weeks shows how vulnerable the market is and it may force Russia's hand in extending the deal", said Warren Patterson, head of commodities strategy at ING.

Nearly every member of the 24-country coalition is on board with a rollover of the agreement, except for Russian Federation, which has been vacillating over how much production it was willing to cut, Falih said in an interview with Tass news agency earlier Monday."All the big producers in OPEC, as well as many non-OPEC countries like Oman, Kazakhstan, Azerbaijan have also supported the extension", Falih said.

OPEC is due to meet on June 25 after talks with its allies led by Russian Federation on June 26, although sources have told Reuters that Russian Federation has suggested a date change to July 3 to 4.

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