Oil prices continued their decline ahead of a June 22 meeting of OPEC and other producers that will discuss raising production to avoid political action in consuming countries to lower oil prices. As of 1:15 p.m. in New York, U.S. benchmark West Texas Intermediate was down 1.55% to $64.79 a barrel
At its June 22 meeting OPEC members and other producers, most importantly Russia, are supposed to decide whether or not to raise production above current quotas. However, it increasingly looks like Russia and Saudi Arabia, both of whom favor increasing production in order bring oil prices down and assure consumers that oil prices aren’t about to spike higher, have jumped the gun and started to raise production before any agreement.
I expect the slide in oil prices to continue as speculation runs amok ahead of the June 22 OPEC meeting on production limits. This past week has seen oil give back just about all of its earlier recent gains. From May 21 through May 28 the futures contract for U.S. benchmark West Texas Intermediate for July delivery dropped 8.1% to $66.36 a barrel. From May 23 to May 28 the futures contract for international benchmark Brent crude for July delivery fell 5.7% to $75.22 a barrel.
Yesterday, Russia sent oil prices tumbling by saying that it might be time for OPEC and its allies (including Russia) to revisit current production cuts. Today, it’s Saudi Arabia. “I think in the near future there will be time to release supply,” said Saudi Energy Minister Khalid Al-Falih. U.S. benchmark West Texas Intermediate fell to close down 4.41% today at $67.59. The international Brent benchmark dropped 3.2% to $76.27
The energy ministers from Russia and Saudi Arabia will discuss a potential relaxation of the global output cap agreed between OPEC and Moscow when they meet on June 22. That was enough today to end the rally in oil. West Texas Intermediate fell to $70.71, down 1.59%and Brent crude dropped to $78.79, a decline of 1.3%.
Just when global financial markets were ready to breathe a sign of relief at a “truce” in the U.S./China trade war, Secretary of State Mike Pompeo delivered a speech at the Heritage Foundation that included a promise to “track down Iranian operatives and their Hezbollah proxies operation around the world and crush them,” and presented a list of 12 demands that Iran must meet before the United States would be willing to end sanctions.
International benchmark Brent crude hit a high of $80.50 a barrel today before closing at $79.41, up 0.16%. U.S. benchmark West Texas Intermediate rose 0.1% to $71.56 a barrel. Today is the first time that Brent has closed above $80 a barrel since late 2014. The driver here is falling global and U.S. inventories.
This development that could push the price of international benchmark Brent crude to $90 wasn’t on my radar screen. It should be–and it should be on yours. (Brent closed up 1.08% today to $79.28 a barrel.) Oil analysts at Morgan Stanley are arguing that changes in the kind of fuel that ocean-going vessels use will result in an additional spike in the price of oil. That’s besides whatever goes on with Iran, the Middle East, and OPEC.
Oil prices are little changed so far today with West Texas Intermediate off 0.04% to $71.11 a barrel as of noon New York time and international benchmark Brent down 0.06% to $77.16 a barrel. The exchange of rockets and bombs between Iranian forces in Syria and Israeli units in the Golan Heights certainly ratcheted up fear of spreading conflict in the Middle East. That would ordinarily have been enough to send oil prices higher on the day
Today crude oil is up, in a strong but orderly move. Two catalysts. First, yesterday President Donald Trump announced that the U.S. would pull out of the 2015 Iran nuclear deal. Second, U.S. crude inventories unexpectedly dropped last week, the U.S. Energy Information Administration reported. Inventories fell by 2.2 million barrels. Oil analysts were looking for an increase in inventories of 1 million barrels.
With the May 12 deadline fast approaching for President Donald Trump to decide whether he thinks Iran is living up to the 2015 deal limiting its nuclear program, oil has moved decidedly higher. As of noon New York time today, West Texas Intermediate is up 1.19% to break the $70 level at $70.55 a barrel. International benchmark Brent crude is up even more, gaining 1.63% to $76.09 a barrel.
Israeli Prime Minister Benjamin Netanyahu has announced that he will make a statement at 8 p.m. Tel Aviv time tonight on a “significant development” regarding the Iranian nuclear pact. (8 p.m. in Tel Aviv is 1 p.m. in New York.) Israeli news sources are saying that the government has obtained documents that government sources say prove Iran has misled the world about its nuclear program.
