Page 6 - DMEA Week 22

DMEA COMMENTARY DMEA

OPEC and its allies to review output

cuts as the oil price rally stalls

OPEC+ considers extending production curbs by one to three months

GLOBAL OPEC+ and its allies will decide as soon as this crude for August slipped 10 cents to $37.74.
week whether or not to extend their historic An earlier OPEC+ meeting would give the
WHAT: output cuts. How long and to what extent global producer group more flexibility to change its
OPEC+ to meet to production curtailments remain in place will be current production limits, as members usually
consider extending crucial to sustaining crude’s rally after a record decide on their plans for shipping oil for July in
production cuts. rebound last month. the first week of June. The group’s preference is
The Organization of Petroleum Exporting to take short-term measures on cuts, as the situ-
WHY: Countries and its allies are expected to bring ation is changing quickly, the delegate said. The
The present agreement their next meeting forward to Thursday June 4 coalition – which includes OPEC’s 13 members
extends through May and to discuss prolonging the present production plus another 10 exporters – has achieved 92%
June. curbs by one to three months, according to a compliance, according to an estimate by data
delegate. The existing agreement calls for easing analytics firm Kpler.
WHAT NEXT: cuts from July, a plan Russia would prefer to stick Meanwhile, the US Oil Fund ETF will begin
The market is watching to. Meanwhile in the US, the oil-drilling fleet its monthly roll of futures contracts on Monday.
to see which way the dice shrank for the eleventh week to a level not seen The fund plans to sell its July holdings and buy
will roll. since before the shale revolution. While North more November and January futures over the
American shut-ins have peaked, according to next 10 trading sessions.
Bank of America, US imports of Saudi crude
have surged, inflating inventories. Chinese resurgence
It seems that US stockpiles are heading As Chinese oil demand rises to near pre-corona-
higher, at least in the short term as more imports virus (COVID-19) levels, more and more tank-
come in; at present the market is oversupplied ers are shipping crude to the Asian nation from
and everyone is looking for more signs of almost everywhere.
demand firming up. While OPEC has helped global oil markets
So far the production curbs have been effec- recover from the coronavirus crisis, the group
tive. The price of crude rallied by almost 90% will soon face a new challenge: the mountain
last month, a record gain, as shrinking supplies of unwanted crude that piled up during the
helped to offset pandemic-related demand pandemic.
losses. Yet the rally depends on producers main- Falling fuel exports from China are providing
taining cuts until the crude surplus that has a much-needed buffer for refiners elsewhere in
poured into the world’s storage tanks is mopped Asia that are still grappling with lower consump-
up. Higher prices could tempt producers to turn tion and poor margins.
the taps back on, undercutting gains. Meanwhile, commodities trader Trafigura
West Texas Intermediate (WTI) for July deliv- Group is being investigated by US authorities
ery fell as much as 3.4% Monday to $34.27, after for alleged corruption and market manipulation
advancing 5.3% on Friday. The US benchmark related to oil trading, the Guardian reported.
crude pared losses to trade at $34.85 as of 10:25 The company is particularly involved in South
a.m. in New York. Global benchmark Brent America and Africa. ™

P6 www. NEWSBASE .com Week 22 04•June•2020