Oil Slips as OPEC Meeting Disappoints
May 29 2017 - 6:28AM
Dow Jones News
By Sarah McFarlane and Biman Mukherji
Oil prices eased on Monday, with investors disappointed at major
producers' decision to maintain their production cuts at the same
level, rather than deepening them.
Brent crude, the global oil benchmark, fell 0.3% to $52.02 a
barrel on London's ICE Futures exchange. On the New York Mercantile
Exchange, West Texas Intermediate futures were trading down 0.3% at
$49.65 a barrel. Holidays in China, the U.K. and the U.S., mean
trading is set to be thin throughout Monday's session.
Crude futures slumped nearly 5% on Thursday after the
production-cut deal led by the Organization of the Petroleum
Exporting Countries was extended by nine months but not deepened--a
let down for investors who anticipated output cuts would be more
severe. The market recovered some losses to finish up nearly 2%
Friday.
"For the next week the market's still going to be digesting
OPEC's decision to take the easiest option and rollover the cuts
for another nine months," said Edward Bell, analyst at Dubai-based
Emirates NBD bank. "I think there had been some expectation on the
investor side of the market that some sort of positive surprise
could have emerged from the meeting but it didn't."
Investment bank RBC said that the production cut extension
should result in a price floor slightly above $50 a barrel. The
bank remains bullish longer-term on oil. RBC's prediction is for
WTI "to move into the mid-to-high-$60/barrel range as global
balances tighten" in the second half of 2017.
A potential near-term catalyst for further gains could be U.S.
inventory data on Thursday. They will be delayed a day this week
because of the Memorial Day holiday. U.S. weekly oil inventories
have fallen for over a month, government data shows. That is a good
sign for investors looking for indications that the market is
rebalancing after years of surplus production.
However, there remains danger that if prices sufficiently rise,
financially fragile countries might pull back on their adherence to
the production cuts extended at last week's OPEC meeting.
"The question therefore is how long OPEC will be able to
maintain its high level of discipline with the production cuts,"
said Commerzbank in a daily note.
Nymex reformulated gasoline blendstock--the benchmark gasoline
contract--fell 0.1% to $1.62 a gallon. ICE gasoil changed hands at
$463.00 a metric ton, up $1.75 from the previous settlement.
Write to Sarah McFarlane at sarah.mcfarlane@wsj.com and Biman
Mukherji at biman.mukherji@wsj.com
(END) Dow Jones Newswires
May 29, 2017 06:13 ET (10:13 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.