Saudi Arabia's Falih says OPEC close to agreement on extending oil deal

Jeannie Matthews
June 9, 2019

The rising dispute in the trade war between the USA and China is reflected in crude prices too.

The price of crude oil had also run up quite a bit in the first few months of the year, with a 46% rise from January through late April. The kingdom has been willing to replace most of the oil barrel production lost from Iran, which is expected to cause a rather contentious meeting between the two countries at the next OPEC meeting.

Oil futures were largely steady on Thursday, after falling to near five-month lows in the previous session, as sentiment remained weak on fresh signs of a stalling global economy and ongoing concerns about growth in supply.

Brent futures were down 27 cents, or 0.4 per cent at $61.70 a barrel.

Basically, rising USA production is more than offsetting the strategy from OPEC and its allies, and if we consider the potential negative impact of the trade war on future demand, prices are likely to continue lower until supply and demand reach a balance point. Further, the sanctions imposed on Venezuela and Iran is offering some support.

At the Multi Commodity Exchange, crude oil contracts for June delivery traded higher by Rs 139, or 3.88 per cent, at Rs 3,721 per barrel in 20,580 lots.

The U.S. benchmark closed 0.4 per cent higher on Tuesday. U.S. West Texas Intermediate crude futures settled at $52.59 a barrel, up 91 cents, or 1.8%.

Signs of slowing global economic activity have increased in recent months, fuelled by trade tensions between the United States and China, the world's top two energy consumers.

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On Wednesday, WTI and Brent hit their lowest levels since mid-January at $50.60 and $59.45, respectively, after US crude production hit a new record high and stockpiles hit their highest in almost two years. Analysts had forecast a 849,000 barrel decrease.

But on Thursday oil prices followed USA stocks higher after Bloomberg News reported the United States is considering a delay in the tariffs on Mexico as talks continue.

With oil demand still holding steady, prices have been upheld until now.

He said that he saw no need to deepen the supply cut.

Brent futures have dropped nearly 20% from their 2018 peak as global supplies tighten following output curbs by OPEC and Russian Federation, as well as a reduction in Iranian and Venezuelan exports due to USA sanctions.

The group will set its policy when it meets later this month or in early July.

However, the investment bank noted that "We now estimate 2019 to be a year in which supply and demand broadly balance".

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