Oil Prices Rise Ahead of Next Week’s OPEC Meeting

29 May 2015 | Author: | No comments yet »

Oil Prices Rise Ahead of Next Week’s OPEC Meeting.

LONDON—Oil prices extended their gains on Friday, helped by a decline in U.S. oil inventories as investors turn their attention to next week’s OPEC meeting.

SINGAPORE — Crude futures rose about 1% on Friday after American inventories fell for a fourth consecutive week although prices are set for a weekly drop on a stronger dollar.On the New York Mercantile Exchange, light, sweet crude futures for delivery in July CLN5, +1.20% traded at $58.39 a barrel, up $0.71 in the Globex electronic session. Oil saw steep falls earlier this week as a resurgent dollar weighed on the market amid concern US crude supply may have started rising again after three weeks of draws. Data from the US Energy Information Administration (EIA) showed on Thursday that crude oil inventories fell by 2.8-million barrels last week, down for the fourth week ahead of Monday’s Memorial Day holiday, which unofficially kicked off the peak summer driving season in the US.

Brent’s premium over US prices has come off more than 40% since mid-April as the Organisation of the Petroleum Exporting Countries (Opec) maintained production, keeping markets well-supplied. “With Opec’s June 5 meeting right around the corner and no chance of a policy change, we will continue to focus on US production and production costs,” Société Générale analysts said in a note. Most market participants are factoring in no change to OPEC’s production ceiling of 30 million barrels of oil a day and its recent stance of not adjusting output levels to support prices. “With [oil] prices forecasted to average higher in coming years and OPEC production costs amongst the lowest in the industry, we expect OPEC will allow prices to ‘correct’ the market while safeguarding as much of their export revenues as possible,” analysts at BMI Research, a unit of Fitch, said. The EIA also reported that March production was 9.53 million barrels a day, the highest since the 1970s. “Yesterday’s data showed a mixed sentiment as the bearish production increase was offset by a bullish inventory decrease,” said Daniel Ang, analyst at Phillip Futures. “As a result of this, we were seeing the bulls and the bears fighting fiercely.” Still, the sharp rise in oil production last week can be partly explained by revised historical figures, Commerzbank said. Oil prices have shot up by around 40% in the past two months from their lows earlier this year on expectations that the surging U.S. oil production will slow and help balance the oversupplied global market. The research firm is bullish on Chinese oil demand and said strategic stock-building and rising consumption from small-capacity teapot refiners will buoy China’s crude imports in the second half of this year and in 2016.

Meanwhile, investors are tracking debt negotiations in Greece, preliminary U.S. first-quarter gross domestic product data and U.S. drilling rig-count numbers due later Friday for more cues. Nymex reformulated gasoline blendstock for June RBN5, +0.95% — the benchmark gasoline contract — rose 164 points to $2.0015 a gallon, while June diesel traded at $1.8856, 152 points higher.

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