Poorer OPEC nations such as Ecuador and Nigeria, with high budget deficits linked to low oil prices, have expressed concern about OPEC’s unwillingness to curb output to help support prices.
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Crude oil was trading lower on the morning of Monday, May 30, 2016, beginning the week on a weak note.
Crude oil prices retreated slightly in the latest sessions after breaking the psychological mark of $50 a barrel.
In early 2016, oil prices had nosedived to around $27 from above $100 a barrel two years ago, owing largely to a stubborn supply glut.
Meanwhile, the global energy industry has its eyes firmly set on the June 2 meeting of the Organisation of Oil Exporting Countries (Opec) in Vienna. As a result, the world remains oversupplied and prices stay under pressure.
However, the market is also presenting some optimistic news that could lead oil prices to trade once more above $50 a barrel.
Pipelines in Nigeria have been affected by sabotage attacks, while the effects of wildfires are still being felt in Canada and bad weather and power outages, among other issues, have seen production in Iraq fall from record levels earlier this year.
Moreover, crude production in the USA and China have also fallen due to slashed budget for exploration.
Sumeet Bagadia, associate director, Choice Broking said, “Crude prices has been surging in last six months mainly on back of multiple factors like constant drop in United States crude inventories, estimates that over-supply scenario will stabilise the market by mid 2017, forecast for economic recovery in USA and China”.
This also came just as US oil production fell to 8.77 million barrels per day (bpd), the lowest level since September 2014, and down 8.77 percent since a June 2015 peak.
China’s crude production fell 5.6% in April and further decrease is on the horizon. BMI Research expects China’s gasoline consumption will grow 6% from a year earlier in 2016, underpinned by robust growth in vehicle ownership. India’s oil demand in the first quarter of this year was 400,000 barrels a day higher compared with a year earlier, which represents almost 30% of the global increase, the group said. However, the rising inventories of major producers competing for market share are denting this sentiment.
“The OPEC players will still struggle to cut production because there are many countries who are looking to get as much hard currencies as they can”, said Alan Oster, chief economist at National Australia Bank.
Trading volumes are expected to be thin as the London and NY markets are closed for a public holiday. The Caixin Manufacturing Purchasing Managers’ Index on China’s manufacturing is also due this week.
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ICE gasoil for June changed hands at $444.00 a metric ton, down $4.50 from Friday’s settlement.
