Oil steady as Donald Trump, Kim Jong Un launch summit in Singapore

Galtero Lara
Junio 15, 2018

Judging by auto sales, demand will continue to grow, with China's May sales of new automobiles standing at 2.29 million, up 9.6 percent from the same month past year, according to the China Association of Automobile Manufacturers (CAAM).

Today's headlines failed to dissipate the uncertainty surrounding a possible OPEC supply hike.

A day before US President Trump pulled out of the Iran nuclear deal, a senior official of the Trump Administration phoned Saudi Arabia to ask it to help keep oil prices stable should the US decision on Iran disrupt oil supply.

"Oil fundamentals are expected to weaken in 2019 on the back of stronger-than-expected non-OPEC supply, but also the potential release of barrels from OPEC as the joint accord between OPEC and non-OPEC is unlikely to stay in place", JP Morgan said in its quarterly outlook.

"A wait-and-see approach is taking hold across the energy complex as market participants buckle down ahead of next week's crunch OPEC/non-OPEC meeting", said Stephen Brennock, analyst at London brokerage PVM Oil Associates. "The U.S. tried it last time against Iran, but oil prices got to $140 a barrel".

OPEC and its allies have been curbing supply since January 2017 to boost oil prices and cut bloated global inventories. "In this context, any geopolitical event can create a price spike". Sliding Venezuelan output has added to supply concerns.

But as always, OPEC's new-found reputation for production restraint isn't entirely what it seems, given the numerous instances of members cheating on their monthly quotas or outright refusing to go along with cutbacks.

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Brent crude futures LCOc1 , the global benchmark for oil prices, were at $76.46 per barrel at 0046 GMT, down 28 cents, or 0.4 percent, from their last close. Both producers stand to lose market share if Saudi Arabia and Russian Federation open the taps.

Top oil exporter Saudi Arabia has told OPEC that it raised oil output to a little more than 10 million barrels per day (bpd) in May, a source familiar with the matter said on Monday, but still within its agreed target.

OPEC says that In 2017, demand for OPEC crude is estimated to stand at 33.1 mb/d, which is 0.7 mb/d higher than a year earlier. Saudi Arabia, with the bulk of the world's spare capacity, has said it would need 90 days to move rigs to drill new wells and raise production to 12 million or 12.5 million bpd.

In the United States, output has risen by nearly a third in the last two years, to a record of 10.8 million bpd.

The kingdom did this during wars in the Gulf and Iraq, but the surge in output was only sustained for a few months.

Gilbert Metcalf: OPEC, along with Russian Federation, agreed to curb production in early 2017 to prop up global oil prices.

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