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Oil drops in cautious trade ahead of OPEC

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AFP London
Last Updated : Jun 01 2016 | 9:28 PM IST
Oil prices dropped today, as traders trod cautiously before this week's OPEC meeting in Vienna, and set aside upbeat Chinese data.
The market has however rebounded strongly from January lows of under USD 30 per barrel, and last week topped USD 50 for the first time this year on production outages in Canada and Nigeria.
But oil has since retreated and remain at less than half of their 2014 peaks of over USD 100 because of chronic global oversupply.
At about 1145 GMT, US benchmark West Texas Intermediate for delivery in July weakened 64 cents to USD 48.46 per barrel.
Brent North Sea crude for August delivery, a new contract, also fell 64 cents to USD 49.25 a barrel compared with yesterday's close.
"Brent crude continues to be constrained by the $50 per barrel level ahead of tomorrow's bi-annual OPEC meeting," noted Inenco analyst Dorian Lucas.

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The 13-member Organization of the Petroleum Exporting Countries (OPEC) meets on Thursday for its first meeting with Saudi Arabia's new oil minister -- a close ally of Prince Mohammed bin Salman, who has been outspoken about not reducing oil production.
The recent recovery in prices has eased pressure on the group to turn down the taps at this week's gathering, analysts say.
"This week's OPEC meeting could be quite interesting, although with oil prices where they are, I would be very surprised if any plans to cut or freeze production are announced," noted Oanda analyst Craig Erlam.
OPEC, which pumps around a third of the world's oil or some 30 million barrels every day, has historically responded to a fall in prices by cutting production.
But in the current cycle producers led by kingpin Saudi Arabia have changed strategy, maintaining output even with lower prices in order to pressure US shale producers.
Major OPEC player Iran has also indicated it is unwilling to cap production after the lifting of nuclear-linked Western sanctions in January.
Meanwhile today, official data from China showed factory activity expanded for the third straight month in May.
The Purchasing Managers' Index, which tracks activities in the country's factories and workshops, showed a reading of 50.1. Any reading above 50 signals expanding activity.
IG Markets analyst Bernard Aw said the change was "too marginal" to hint at a pick-up in crude demand in one of the world's largest energy consuming nations.

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First Published: Jun 01 2016 | 9:28 PM IST

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