NEWS
Crude-oil futures climbed on Tuesday as upbeat comments by Saudi Arabia’s oil minister helped lift the U.S. benchmark to its highest settlement of the year, ahead of a key meeting of the Organization of the Petroleum Exporting Countries later this week.
Weakness in the U.S. dollar and expectations that weekly data will show a decline in U.S. crude supplies also provided support for oil. On the New York Mercantile Exchange, July crude rose $1.06, or 1.8%, to settle at $61.26 a barrel. Based on the most-active contract, that was the highest settlement price since early December. July Brent crude added 61 cents, or 0.9% to $65.49 a barrel on London’s ICE Futures exchange. “The focus remains towards the OPEC meeting” and in the meanwhile, every headline from OPEC officials or ministers “could increase the volatility for the oil price,” said Naeem Aslam, chief market analyst at AvaTrade.
OPEC is due to officially meet on June 5. The market consensus is that the oil cartel will maintain its oil production ceiling of 30 million barrels a day, as producers like Saudi Arabia continue its strategy of defending its market share. A recent Reuters survey, however, pegged the cartel’s May output at 31.2 million barrels a day. It is very “clear that [Saudi Arabia] is only interested in maintaining its market share — not the price stability,” said Aslam. Saudi oil minister Ali al-Naimi, arriving in Vienna Monday, said his country’s strategy to defend market share is working. His comments “basically confirm consensus expectations of a non-output-cut decision at Friday’s OPEC meeting,” said Michael Poulsen, oil analyst at Global Risk Management. But some observers note that there is actually a chance that OPEC might lift its official output target, rather than cut it. Olivier Jakob, analyst at Petromatrix, says the organization could increase its target to 30.5 million barrels a day, which would be closer to its actual production.
On Tuesday, a decline in he ICE U.S. dollar index boosted sentiment for dollar-priced commodities like oil, which become cheaper for holders of other currencies as the dollar depreciates. And late Tuesday, the American Petroleum Institute will publish its U.S. oil inventory report. The U.S. Energy Information Administration will follow with its own supply report Wednesday. Analysts polled by Platts expect the data to show a decline of 2.4 million barrels in crude supplies.