OPEC Fears Dominate Crude Trading, Another Weekly Loss Logged

But some metrics are pointing to near-term strength: File Image/Pixabay

For the second time this week, crude traders shifting from worrying about global oversupply to supply tightness and then, on Friday, back again as expectations were high for the Organization of the Petroleum Exporting Countries (OPEC) to boost output for July beyond previous parameters.

Brent settled down 25 cents at $63.90 per barrel and West Texas Intermediate settled down 15 cents at $60.79 per barrel; for the week, each benchmark logged a decline of over 1 percent.

The consensus on OPEC that has been building for most of the week is that it will agree to increase July production larger than the 411,000 barrels per day (bpd) rise it abided by for May and June.

Earlier in the week, an OPEC delegate said the hike might be as steep as the May and June rises: 411,000 bpd.

Analysts such as those employed by JPMorgan who believe global surplus currently stands at 2.2 million bpd said OPEC’s decision will result in an oil price adjustment: they expect prices to remain within the current range before easing into the high $50s by year-end.

Friday’s crude trading was also pressured by U.S. president Donald Trump stating that China had violated its trade agreement with the U.S. and that he was considering imposing more tariffs; however, he later swayed trading (again) by stating he was willing to speak with Chinese president Xi Jinping.

While most trading influences on Friday were bearish, Bloomberg noted that “some metrics are pointing to near-term strength in the oil market: WTI’s front-month futures were trading about 93 cents more per barrel than the contract for the next month, the biggest premium since early January.”

Also, U.S. gasoline consumption over Memorial Day weekend, the start of the U.S. driving season, rose by 2 percent from the same weekend last year, according to AAA data, and this compelled Patrick De Haan, head of petroleum analysis at GasBuddy, to state, “Refineries have a lot of room to run hard.”

But some well-known sources remained downbeat about market conditions, case in point being the U.S. Energy Information Administration, which reported that crude production in March surged to an all-time high of 13.4 million bpd; however, total petroleum product supplied (a proxy for U.S. oil demand) fell to 19.9 million bpd, the lowest in a year.