Oil prices hover around $50 a barrel as investors mull OPEC, supply data
London (Jun 3) Oil prices gained on Friday as declining U.S. oil stocks boosted market sentiment despite the Organization of the Petroleum Exporting Countries’ rejection of production caps, with global benchmark Brent maintaining yesterday’s $50-plus close.
Brent LCOQ6, -0.32% was up 0.16% at $50.12 a barrel for August deliveries while its U.S. counterpart West Texas Intermediate CLN6, -0.31% was up 0.08% at $49.21 a barrel.
Oil production in the U.S. fell another 32,000 barrels a day week-on-week and most observers believe that this is the major tailwind for prices alongside outages in Nigeria, Canada, Saudi Arabia and Iraq.
Yesterday’s OPEC meeting ended as expected with members agreeing to continue to observe the market and continue with its current high production strategy.
Read: OPEC’s plan to let crude prices rebalance themselves is panning out — so far
Many analysts said these outcomes are what OPEC envisioned when it implemented a hands-off policy nearly two years ago. Given that supply and demand of the oil markets has started to rebalance, it was not a surprise that the cartel decided to maintain the policy at its biannual meeting on Thursday.
“The fact oil prices didn’t make any major movements shows the markets had zero expectations a production ceiling would be reached in the meeting,” said Ric Spooner, chief analyst at CMC Markets.
Other observers believe that the meeting was bullish for the oil market. Bjarne Schieldrop, chief commodities analyst at Sweden’s SEB Markets Merchant Banking, said the meeting removed a substantial downside risk as Saudi Arabia made it clear it would not flood the market with oil as a means of hurting Iran.
“The overall united and fairly positive front which emerged at the end of the meeting created market confidence that there is no internal dogfight in OPEC where production increases are executed as a political/economical tool used to hurt the other members,” Schieldrop said in a note.
The market will be watching the U.S. nonfarm payroll data to be released by the Labor Department later today. Economists surveyed by The Wall Street Journal expect it will show payrolls rose by 158,000, with the unemployment rate steady at 5%.
Analysts said an improvement in U.S. job data would give the Federal Reserve more reason to raise interest rates which would strengthen the dollar BUXX, +0.02% DXY, +0.04% As oil is pegged to the dollar, a stronger greenback usually does not bode well for oil buyers using other currencies.
Nymex reformulated gasoline blendstock for July RBN6, -0.73% —the benchmark gasoline contract—fell 0.62% to $1.62 a gallon, while July diesel traded up 0.09% at $1.51.
ICE gasoil for June changed hands at $448.00 a metric ton, down $1.75 from Thursday’s settlement.