Oil price flat despite Opec signalling further curbs

Oil prices were largely flat yesterday after steep losses the previous session, with rising US production weighing against comments from leading Gulf oil producers that an extension to Organisation of the Petroleum Exporting (Opec)-led supply cuts was likely.

Brent futures were at $52.93 a barrel, unchanged from their last close, while US crude futures were down at $50.50 a barrel.

“The US market perhaps doesn’t believe in the oil market balance that Opec would have us believe,” said Hans van Cleef, senior energy economist with ABN Amro.

Opec members Saudi Arabia and Kuwait said an effort by Opec countries and other producers, including Russia, to cut oil output was likely to be extended beyond June.

However, bloated inventories weighed. Despite a drop in US crude stocks last week, US crude oil production rose to 9.25m barrels per day, official data showed, up almost 10% since mid-2016. Patrick Pouyanne, the chief executive of French oil and gas giant Total, said prices could fall again by the end of the year due to a rapid rise in US shale production.

“The rebalancing in US crude stocks may have got under way, but concerns about further gasoline builds are rife even as the US summer driving season shifts up a gear,” said Stephen Brennock, an analyst with PVM Oil Associates. “With questions hanging over US gasoline demand, any further product builds will act as a brake on the oil price recovery.”

Darragh Crowley, energy trader at Bord Gáis Energy, said the direction of global oil prices remained highly uncertain.

“At the moment, Opec is curbing the oil supply, trying to boost prices and reduce the stockpiles of excess oil which have built up since 2014,” said Mr Crowley. “The stockpiles have not rebalanced as yet, because we have seen a pick-up in US shale oil production in response to the higher prices. This makes an extension of the Opec deal more likely, and may cause oil prices to rise if the market rebalances as Opec predicts that it will.”

“However, what we have seen so far is the increase in US production is negating or offsetting a lot of the Opec cuts.

“So, if we continue to see US production increase even further, this may actually cause oil prices to fall because the market could lose faith that Opec can really influence prices for any prolonged period.”

Reuters and Irish Examiner

© Irish Examiner Ltd. All rights reserved

Email Updates

Receive our lunchtime briefing straight to your inbox

More in this Section

Dungarvan, global home of Panadol, gets €8m investment

AIB flotation could net €3.4bn for State

Cork company partners to connect rural counties

New tourism minister comes at ‘pivotal’ time


Breaking Stories

Irish airline to stop selling tickets because they do not have licence

Borrowing wanes as rising inflation tightens squeeze on UK consumers

Wetherspoon's to create 200 jobs in €15m 'super pub' in Dublin

Economic forecast sees GDP and jobs growth for next three years

Lifestyle

Inistearaght: The Blasket that looks like a Skellig

Meet the woman turning the oceans’ trash into photographic gold

20 years later, people are still spellbound by Harry Potter

A passion for Harry Potter - the books that taught a generation about friendship, courage and learning

More From The Irish Examiner