Oil steadies as risk of mideast strife ebbs before OPEC meeting
NEW YORK (Bloomberg) -- Oil was little changed in New York, steadying after the biggest loss in more than a week as concerns about Middle East strife receded and hints that OPEC may further extend its output cuts have surfaced.
Geopolitical strife from Syria to Saudi Arabia led to a higher risk premium in the market last week, which is now deflating. At the same time, investors are gearing up for a Friday producer meeting in the midst of comments from Kuwait that OPEC and allied producers will discuss prolonging their deal to reduce output into 2019.
“Some of the geopolitical risk we priced in last week because of the concerns about what was happening in the Middle East seems to be slowly ebbing out of the market, ” said Gene McGillian, a market research manager at Tradition Energy in Stamford, Connecticut. At the same time, “you’re also getting chatter that the OPEC members are considering extending the cuts. You should start to see some support soon.”
Energy ministers from Saudi Arabia, Russia, UAE, Oman, Algeria, Kuwait and others will attend a meeting Friday of a joint ministerial monitoring committee in Jeddah, according to a person familiar with the matter. This comes at a time when the U.S. is churning out output at record high levels. Production from the world’s most prolific oil play, the Permian Basin, is expected to set new records as drillers keep on adding more wells.
West Texas Intermediate for May delivery dropped $0.03 to $66.19/bbl on the New York Mercantile Exchange. Total volume traded Tuesday was about 25% above the 100-day average.
Brent for June settlement rose $0.21 to $71.57/bbl on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $5.30 premium to June WTI.
Yuan-denominated futures for September delivery slid 0.7% to 425.1 yuan/bbl on the Shanghai International Energy Exchange.
The Bloomberg Dollar Spot Index rallied for the first day in three sessions.
OPEC and allied producers including Russia will consider maintaining their production limits beyond the end of the year when they meet in June to assess the market, Kuwait Oil Minister Bakheet Al-Rashidi said.
In the U.S., crude stockpiles probably fell by 600,000 bbl last week, according to the median estimate in the Bloomberg survey before government data is released on Wednesday. Stocks in Cushing, Oklahoma, the delivery point for WTI futures, probably shrank by 650,000 bbl last week after rising for five weeks through April 6.
The industry-funded American Petroleum Institute will release its weekly tally of inventories later on Tuesday.
Oil Market News
Gasoline futures rose 0.2% to $2.0432/gal on Tuesday. Oil prices are near levels that could prove harmful to OPEC and other producers as global markets tighten and a major supply crisis looms in Venezuela, the head of the International Energy Agency said. The global oil market may return to 2015 imbalance levels next year if the deal to cut oil output reached by OPEC and Russia is not extended beyond 2018, Rystad Energy CEO Jarand Rystad said at an industry event in Moscow.
