Oil slumped on Thursday, May 31, on expectations of a rise in U.S. crude inventories and the prospect of boosted output from OPEC later this year.
The oil price slid to a three-week low below $75 a barrel on Monday after Organization of Petroleum Exporting Countries and its non-OPEC allies including Russia indicated they could adjust their deal to curb supplies and increase production.
Although the price of benchmark Brent crude has recovered some ground since then to trade around $77, investors remain cautious before an OPEC meeting on June 22 when it will decide on its policy.
Sources told Reuters that Saudi Arabia, the effective leader of OPEC, and Russia were discussing boosting output by about 1 million barrels per day (bpd) to compensate for losses in supply from Venezuela and to address concerns about the impact of U.S. sanctions on Iranian output.
At 0923 GMT, Brent crude futures were down 31 cents at $77.41 a barrel, reversing some of Wednesday’s 3 percent rise. U.S. West Texas Intermediate crude was down 39 cents at $67.82 a barrel.
“If this is a real correction, then the price should get down to the low $70s or even the mid-$60s,” SEB chief commodities analyst Bjarne Schieldrop said. “The market needs to be cautious ahead of the OPEC meeting.”
OPEC and non-OPEC producers have committed to cut output by 1.8 million bpd until the end of 2018.
A Gulf source familiar with Saudi Arabia’s thinking said OPEC and its allies aim to continue their agreement to cut oil output through the end of the year, but they are ready to make adjustments to offset any supply shortfall.
“With the OPEC meeting still another three weeks away, oil prices are likely to remain sensitive to headlines,” ANZ bank said in a note.
Global inventories have been broadly falling, but U.S. crude stockpiles rose by 1 million barrels in the week to May 25, according to the American Petroleum Institute (API). That beat analyst expectations for a decrease of 525,000 barrels. [API/S]
Data from the Energy Information Administration is due at 11 a.m. EDT (1500 GMT) on Thursday, a day later than usual due to a U.S. public holiday on Monday.
