Oil prices tumbled over two dollars per barrel on Friday as the market waits on tenterhooks to learn the outcome of next week’s OPEC meeting in Vienna. Recently, Russia and Saudi Arabia hinted that they will boost their production. ConocoPhillips photo.
Oil prices down over 3 per cent Friday
Oil prices fell significantly on Friday. Both benchmark Brent and US West Texas Intermediate fell by about $2/barrel as the jittery crude market waits to learn if participants in the OPEC supply cut agreement will opt to relax output restrictions when they meet in Vienna next week.
By 1:05 p.m. EDT, Brent crude dropped $2.47 to $73.47/barrel and US WTI fell $2.05 to $64.84/barrel. Brent crude is on track to decline over 3 per cent and US WTI is set to fall 0.7 per cent. The Canadian Crude Index was down $1.66 to $39.59/barrel.
Brent and US WTI both hit 3 1/2 year highs last month, but have lost some value on rising US crude production as well as indications that OPEC and Russia will boost their production as well.
OPEC and members of the cartel’s supply cut agreement will meet in Vienna on June 22-23 to discuss increasing their output.
“We’re going into an OPEC meeting where everyone is talking about raising production – the only question is by how much,” Bob Yawger, director, energy at Mizuho told Reuters.
On Thursday, Russia’s Energy Minister Alexander Novak said he and Saudi Arabia’s Energy Minister had agreed during talks in Moscow that both oil giants “in principle” supported a gradual increase in output.
According to Reuters, Novak said “We in general support this … but specifics we will discuss with the ministers in a week”. He added that beginning July 1, participants could gradually boost output by 1.5 million barrels per day (b/d).
Falih offered no specifics on what the upcoming OPEC decision could be, but he said “We will see where we go, but I think we’ll come to an agreement that satisfies, most importantly, the market.”
A number of analysts are expecting the group to agree to increase their production.
“The switch has been turned on for a supply increase,” Olivier Jakob oil markets consultancy Petromatrix told Reuters.
However, Greg McKenna, chief market strategist at AxiTrader said next week’s OPEC deal was still uncertain. He added that Russia seems to want a bigger increase in production than other pact participants.
“My guess is the increase will be something less than the 1 million b/d that the U.S. is supposed to have asked the Saudis for,” McKenna said.
Reuters reports that on Thursday, Saudi Crown Prince Mohammed bin Salman told Russia’s President Vladimir Putin that the kingdom wants to continue to cooperate with Russia on global oil markets.
On Friday, Baker Hughes reported the US oil rig count rose by one to 863, up 116 from one year ago. The Canadian oil rig count rose by 18 to 87, down by four compared to this time last year.
Oil prices were somewhat supported after armed brigades shut down major Libyan oil ports Thursday, dropping production by 240,000 b/d.
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