As the Organization of the Petroleum Exporting Countries (OPEC) will not likely succeed at its second attempt to convince the major oil kingpins to act on the oversupply concern in the market, oil traders are eagerly watching the performance of the commodity.
Earlier today, oil prices traded lower as the greenback extended its gains during the session. U.S. West Texas Intermediate crude futures were down 12 cents to $49.21 per barrel while the International Brent futures lost 21 cents to change to $49.11 per barrel.
Apart from the strength of the dollar, the expected recovery of the production of the oil sands in Canada drove oil lower. Recently, Suncor Energy (NYSE:SU) confirmed its plan of going back to business this week after closing its fields in Alberta.
Although the Canadian output is expected to weigh on the commodity, WTI may still be supported after U.S. oil inventories declined on peak demand. U.S. oil production has dropped to its lowest level since September 2014 and has declined almost 9 percent since the recorded all-time peak last June 2015. Experts say seasonal demand has started since summer is already approaching and the country has celebrated Memorial Day.
As Brent futures remain to be supported by the supply disruptions in Nigeria, the output of the country reached the lowest level in 20 years. Meanwhile, oil production may fall to 470,000 barrels per day on an annual basis this year as the recent oil backlog persists.
This week, OPEC is all set to have its June meeting behind the various concerns in crude oil. Aside from the production cut in Nigeria, Iran is producing near pre-sanction levels, Saudi Arabia is operating with its newest oil minister and there is turmoil in Venezuela.
In terms of the domestic market, oil prices have increased approximately 35 percent as oil companies reduced the capex costs and the market sees the economic stability of the United States. From the $36.46 per barrel last December 31, Brent, as mentioned, exchanged hands close to $50 at $49.59 per barrel on the New York Mercantile Exchange.
Currently, Iran is pumping 3.56 million barrels per day close to 4 million bpd. The country has amplified its market share as it provides big discounts. Amir Hossein Zamaninia, Iran’s deputy oil minister for international affairs, reiterated that Saudi Arabia remains to be its major competitor.
Khalid al-Falih, Saudi’s newest oil minister, is expected to attend his first OPEC meeting, and doubts on his skills to address the oil-related issues are being raised by market experts. Saudi Aramco Chief executive Amin Nasser confirmed that production will increase in 2016 whatever the call is on Saudi Aramco, as they see the need for additional production.
Clearly, OPEC has to deal with the unceasing disagreements between Iran and Saudi Arabia and the unity among other members of the organization.
The recent performance of oil in the market could be an indication that the bearish movement has finally gone. If the oil price will cross the $50 mark then it might surge towards $65 per barrel.
Investors must be keen on the price movement of oil in the second half of 2016.