Analysts think the next few days will determine crude's near-term health: File Image/Pixabay
Phil Flynn, senior market analyst, Price Futures Group Inc.
There are still many doom-and-gloom people that are down on the economy
With expectations high that the Organization of the Petroleum Exporting Countries (OPEC) will extend their output cuts and perhaps deepen them when the cartel meets next week, traders caused crude prices on Thursday to rise again, albeit modestly.
But as usual, the expectations were based largely on rumour: sources told Reuters that Algeria had floated an idea of deepening the cut by 600,000 barrels per day (bpd), and the notion that the cartel will extend the cuts is based largely on persistent fears of weakening demand and oversupply, even though the previous trading session saw the largest inventory drop since September of 2016.
Iraq too believes OPEC will follow through: Thamer Ghadhban, that country's oil minister, said on Thursday, "The rollover at least would be at the same level because it has not been very effective, it has been effective to a certain level to minimize the glut in the market, but there are now ideas or calls for agreeing (on) even more."
Gene McGillian, vice president of market research at Tradition Energy, echoed the sentiments of many of his colleagues by stating, "If we don't see OPEC extend its production agreement and the U.S. and China leave the G20 with more problems, this rally up to one-month highs could stop."
Accordingly, Brent on Thursday rose a meager 6 cents to settle at $66.55 per barrel, and West Texas Intermediate rose 5 cents to settle at $59.43 per barrel.
While expectations for OPEC are high, they are more guarded with regards to the trade war between the U.S. and China being resolved shortly: on Wednesday, Donald Trump said a trade deal is possible this week at the G20 summit but he is prepared to impose tariffs on most remaining Chinese imports if the two countries don't agree.
Craig Erlam, analyst at OANDA, remarked, "It's all about the G20; it's clear that investors are a little cautious when it comes to this meeting, given how talks collapsed previously and the fighting talk we've since seen from both sides."
Phil Flynn, senior market analyst at Price Futures Group Inc, agreed, and he took a swipe at the negative sentiment impacting the crude sector of late by saying, "there are still many doom-and-gloom people that are down on the economy: that is why the oil market will take its cue from G20 headlines."