Oil Prices Little Changed Ahead of OPEC Meeting -- Update
30 May 2016 - 4:56PM
Dow Jones News
By Jenny W. Hsu
HONG KONG--Crude oil prices were little changed Monday as
investors waited for cues from the Organization of the Petroleum
Exporting Countries meeting Thursday, where the issue of oversupply
is expected to take center stage.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in July recently traded at $49.37 a barrel, up $0.04,
while July Brent crude on London's ICE Futures exchange gained
$0.10 to $50.05 a barrel.
Monday trading volume is expected to be low in Asia because of a
public holiday in the U.S.
For nearly two years, a supply glut has dragged oil prices well
below highs of about $100 a barrel. Major producers in and outside
OPEC have expanded production in an effort to protect market share
amid low prices. As a result, the world remains oversupplied and
prices remain under pressure.
But thanks to several unplanned outages in Canada and Africa,
about 3.5 million barrels of oil have been offline each day in
recent weeks, pushing prices over $50 a barrel for the first time
in six months on Thursday.
While some outages are coming to an end--Canada's Suncor Energy
Inc. on Sunday said it had begun a "staged restart" of its
operations--oil production in Nigeria remains precarious. According
to the latest reports, a militant group that calls itself Niger
Delta Avenger said it blew up a key production facility and an
export terminal. Nigeria's output has already fallen to its lowest
level since 2009.
In addition, crude production in the U.S. and China has also
fallen because of slashed exploration budgets. On Friday,
industrial service company Baker Hughes Inc. said the number of
active U.S. rigs drilling for crude fell by two to 316 last
week.
"Assuming that the U.S. oil rig count stays at its current
level, U.S. oil production would decline by 750,000 barrels a day
between fourth-quarter of 2015 and fourth-quarter of 2016," said
Goldman Sachs in a note.
China's crude production fell 5.6% in April and a further
decrease is expected.
Along with less, strong oil demand from China and India are also
expected to soak up the some of the oversupply. BMI Research
expects China's gasoline consumption will grow 6% from a year
earlier in 2016, underpinned by robust growth in car ownership.
Meanwhile, the International Energy Agency has dubbed India as the
"star performer." 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 nearly 30% of the global increase, the group
said.
Still, participants remain skeptical about how long it would
take for markets to skew to a rebalance, especially when major OPEC
producers are accelerating output.
"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.
Investors will also be watching U.S. oil data to be released
Thursday instead of Wednesday because of Memorial Day.
Write to Jenny W. Hsu at jenny.hsu@wsj.com
(END) Dow Jones Newswires
May 30, 2016 11:41 ET (15:41 GMT)
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