OPEC seeks to balance market as uncertainty lingers

Oil is Bearish

Addressing to Saudi energy minister's comment on OPEC+ output cut, an analyst at futures brokerage at FXTM, Han Tan said, "Brent futures continue rising. after the Saudi Arabian Energy Minister expressed confidence that OPEC+ producers will prolong their output cuts program through the second half of 2019".

OPEC and its Russia-led non-OPEC allies are withholding a total of 1.2 million bpd of oil supply from the market until the end of June and are set to meet in coming weeks to discuss how to proceed with their oil supply management policies in place since the start of 2017.

"With China slowing, the European Union sickly and the United States data starting to wobble, an economic downturn remains a clear and present danger", said Stephen Innes, managing partner at Vanguard Markets.

Still, OPEC is widely viewed as a band-aid and not a solution that will prevent crude from spiraling into a bear market; Tamar Essner, director of energy & utilities at Nasdaq, pointed out that "The zeitgeist of the oil market is that it wants to track the broader macro environment; a lot hinges on what the outlook for the global economy looks like, which really hinges on a trade deal" - referring to a deal between the US and China.

The US Energy Information Administration (EIA) cut its forecasts for 2019 world oil demand growth and US crude oil production in a monthly report released on Tuesday. Although Russia is not a member of OPEC, it has been involved in two production cuts over the past three years.


While Saudi Arabia has wanted for some time to prolong the cuts, Russian Federation has been less resolute, saying it's better placed to withstand lower prices than its Gulf ally.

Brent crude futures, the global benchmark for oil prices, fell $1.33, or 2.1%, to $60.96 a barrel by 1:09 p.m. EDT (1709 GMT).

OPEC is close to reaching an agreement to extend the production cut deal beyond June, al-Falih said on Friday from Russian Federation, adding that the sticking point is now to calibrate the cuts with the non-OPEC group of producers led by Moscow. Massive drops in exports by Iran and Venezuela plus the agreed output cuts implemented by the Opec+ group since January, have cut supplies.

Stock markets rose on Monday after a deal between the United States and Mexico to combat illegal migration from Central America late last week removed the threat of USA tariffs on goods imported from Mexico. OPEC originally scheduled its regular semi-annual meeting for June 25 in Vienna, with non-OPEC partners to join the talks the following day.

President Vladimir Putin has shown he is reluctant to walk away from the agreement, which also ensures his political partnership with Saudi Arabia as economic ties tighten.

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