Crude oil futures were lower during mid-morning trade in Asia Tuesday, as markets digested a flurry of news and data on geopolitics and fundamentals just days ahead of the key OPEC/non-OPEC meeting at Vienna.
Thank you for reading this post, don't forget to subscribe!“Oil prices have sold off over the past three weeks on concerns over higher OPEC production, weaker EM [emerging markets] demand, escalating trade wars and rising inventories,” Goldman Sachs analysts said in a note.
At 10:45 am Singapore time (0245 GMT) Tuesday, August ICE Brent crude futures were down 43 cents/b (0.57%) from Monday’s settle to $74.91/b, while the NYMEX July light sweet crude contract was down 25 cents/b (0.38%) at $65.60/b.
After losing close to 4% over the previous week, both the benchmark contracts bounced back higher on Monday, with the European benchmark contract rising close to $2/b day on day.
“Oil prices recovered from its decline likely on short-covering behavior,” OCBC commodity economist, Barnabas Gan, said.
Market focus remains on the OPEC meeting, with expectations of a rise in output by a modest 300,000 b/d to 600,000 b/d, analysts said.
OPEC is set to meet on June 22 in Vienna to decide the future of the oil production cut deal, with non-OPEC partners including Russia, joining the meeting a day later.
“In the lead up to Friday’s OPEC meeting, the swivel of talks continue to dominate price action and the latest expectations that OPEC could contemplate lifting production below earlier cited levels of over 1.0 million barrels per day had been the latest driver,” IG market strategist Pan Jingyi said.
“One cannot place enough emphasis on the importance of this upcoming meeting for the ripple effect across asset classes,” she added.
“After the OPEC meeting, we believe that the tightness of the oil market will be the catalyst for Brent prices to rally, through steeper backwardation,” Goldman Sachs analysts said.
Meanwhile, US shale oil production is slated to rise by 141,000 b/d month on month in July, federal figures released Monday showed.
Analysts surveyed Monday by S&P Global Platts expect US crude stocks to have declined by 3.7 million barrels for the week ended June 15. In addition to stocks, market participants are also expected to keep an eye on US export data amid a tighter ICE Brent/NYMEX spread and doubts over China’s ability to absorb US barrels.
The trade war between the US and China escalated on Saturday with China threatening an additional 25% tariff on $50 billion worth of US goods, including energy and agricultural products, in response to President Donald Trump’s similar decision on Chinese product imports.
Preliminary data on last week’s US inventory levels is due for release from the American Petroleum Institute later Tuesday, and the more definitive numbers from the US Energy Information Administration later Wednesday.
As of 0245 GMT, the US Dollar Index was down 0.61% at 94.25
–Avanika Ramesh, avantika.ramesh@spglobal.com