Oil Hits One-Month High
- Author: Zachary Reyes May 24, 2017,
May 24, 2017, 15:23
Oil prices fell on Tuesday after U.S. President Donald Trump proposed the sale of half of the country's strategic oil reserves in his budget plan, just as producer club OPEC and its allies are cut back output to tighten the market.
In the longer term, there are concerns among OPEC countries that higher oil prices may end up being counterproductive as they encourage USA shale gas producers to re-enter the market - a development that could weigh on oil prices. In fact, the rapid response by the United States shale sector to the OPEC deal helps explain why oil prices retreated earlier this month. It also suggested opening up more production in Alaska. Eventually, Iraq agreed to the second deepest cuts under the OPEC accord in November.
The resurgent flow of petrodollars explains why Saudi Arabia and Russian Federation have largely convinced everyone else in the deal to extend the production cuts another nine months to the end of March 2018.
Light, sweet crude for July settled up 34 cents, or 0.7%, at $51.47 a barrel on the New York Mercantile Exchange.
OPEC and other producers initially agreed to reduce output by 1.8 million barrels per day in the first half of 2017, with a possible six-month extension.
Opec ministers hope a nine month extension of the cap will be enough to end a three year old oil glut.
Crude oil prices were down more than 1 percent in overnight trading as investors mulled over a U.S.
VIENNA-Saudi Arabia is pushing the OPEC oil cartel and other big producers gathered here this week to extend crude production cuts for another nine months.
Tomorrow OPEC ministers are set to meet at their Vienna headquarter in order to decide the fate of the current OPEC deal that is aimed at removing as much as 1.76 million barrels of crude oil from the market.
At the same time, commodities brokerage Marex Spectron said "spot demand (for oil) remains strong, and we expect it to get even stronger (in coming weeks)".
Brent futures rose 26 cents, or 0.5 per cent, to settle at $US53.87 a barrel, while US West Texas Intermediate crude for June rose 40 cents, or 0.8 per cent, to settle at $US50.73 per barrel on its last day as the front-month.
Iraqi Oil Minister Jabar Ali al-Luaibi, right, and Saudi's Energy Minister Khalid Al-Falih hold a joint press conference in Baghdad, Iraq, Monday, May 22, 2017.
James Henderson, director of the natural gas research program at the Oxford Institute for Energy Studies, said that an announcement of an extension to output cuts is attainable, but asserted that implementing it is more hard.
"The Saudi oil minister's view seems accurate and no serious objection is expected if at all", said one OPEC delegate, who asked not to be identified as he is not allowed to speak to the media.