Oil Edges Up Ahead of OPEC Market Report

Marco Green
June 12, 2018

Question marks over global economic growth, and resulting oil demand, as well as over USA producers' capacity to pump oil at an ever faster pace make forecasting hard, the Organization of the Petroleum Exporting Countries said in its regular monthly oil market report.

Oil prices ticked up Tuesday morning ahead of OPEC's monthly market report and after President Donald Trump's landmark meeting with North Korean leader Kim Jong Un.

OPEC kept its projected world oil demand growth unchanged for 2018, but offered a slight upward revision to its total non-OPEC supply by 130,000 bpd to 59.75 million bpd. OPEC responded to the last bear market by cutting output to help balance the supply glut.

Prices were also weighing uncertainty on OPEC supply hikes.

The oil price has risen steadily over the past year, with Brent crude establishing itself above $70 for the first time in years last month - some 30 percent higher than at the same time in 2017.

Oil prices were little changed on Monday as comments from the Iraqi oil minister cast doubt as to whether the Organization of the Petroleum Exporting Countries would decide to boost output at its upcoming meeting.

There are already a lot of signs pointing towards a tough June 22 OPEC+ meeting, with Russian Federation and Saudi Arabia clearly in favor of higher production and Iraq and Iran clearly opposed to it. Iraq is not really in a good position to oppose the raise, however.

"Markets are braced for the most fractious conference as OPEC members look fundamentally divided", said Phillip Futures analyst Benjamin Lu.

OPEC and its partners are due to meet on June 22 at the cartel's headquarters in Vienna, Austria, to discuss policy.

In other words, while some analysts still wonder if the reports about Russian Federation and Saudi Arabia discussing a production increase of 1 million bpd are just speculation or an action plan, the increase is already happening and it is making at least one other OPEC member unhappy.

However, analysts expect surging US output to start offsetting efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to withhold production, which have been in place since 2017 and in the first half of this year have pushed up prices significantly.

Other reports by Click Lancashire

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