Oil price fell by nearly 3 percent recently as traders as well as investors disregarded a fifth straight weekly decline in U.S. crude stock piles and instead focused on big build in distillates which included diesel since the peak season for U.S. road travel gets under way. Core Gulf members of the Organization of the Petroleum Exporting Countries that pumps over a third of the world’s oil intend to have a consensus in maintaining the group’s oil output at the meeting held on Friday.
According to a senior Gulf OPEC sources has informed to Reuters. OPEC delegates informed Reuters in Vienna that `there is consensus among Gulf OPEC countries and others, to keep the –production, ceiling unchanged. Nobody wants to rock the boat.
The meeting is expected to be smooth sailing’. Dollar had gained about 0.4% against a few other currencies since the euro slipped, thus making fuel much more expensive to other currencies holder. Benchmark Brent crude oil for the month of July dropped $1.75 to a low of $63.74 prior to recovering a bit to around $63.90, down to about 2.5%, by 1010 GMT U.S. crude was $1.40 or 2.25% for $59.86 a barrel.
Analyst Gene McGillian – Market Down After Pairing Losses
Brent had collapsed last year to almost $45 for a barrel in January from $115 last June pressing several oil producers in countries outside OPEC which included U.S. shale drillers as well. OPEC which pumps over a third of the world’s oil is likely to reject any calls for output cuts intending to produce around 2 million barrels per day beyond demand.
Crude stocks at Cushing, Oklahoma, delivery hub for U.S. oil fell also together with gasoline stocks. However distillate stockpiles including diesel and heating oil rose by 3.8 million barrels, which is four times the 1.1 million barrel build prediction.
According to analyst Gene McGillian of Tradition energy in Stamford, Connecticut, comments, `that he thinks the market came back down after pairing losses at first is telling of the sentiment that people don’t really think this is a very bullish report’. He is of the belief that consistent draws for gasoline and distillates would be an indication of demand. He added. `If not with refinery runs of above 93%, we could end up with a glut of refined products in storage rather than crude now’.
Future Seems Positive
Carsten Fritsch, analyst of Frankfurt based Commerzbank tends to agree stating that `a market that does not rally on falling inventories and a slumping U.S. dollar looks vulnerable to the downside’. Ali al-Naimi. Saudi Arabian Oil Minister stated in a conference organised by OPEC in Vienna recently that the group was `currently meeting global demand and does not see this changing.
In terms of the long-term energy outlook, the future looks very positive’, he added. OPEC, by pumping 2 million barrels per day which is more than needed is helping in filling oil inventories across the world and is keeping the price of oil for delivery now at a discount for future prices.
Some of the analysts are of the opinion that there seems to be a chance OPEC could increase its target on production soon. Barclay is said to have stated in a preview note of a recent meeting that `with heightened geopolitical risk threatening oil supplies in the Middle East and North Africa, it is highly unlikely that OPEC will reduce the quote, but an increase is possible’.
