OIL slumped as Opec+ pulled forward a meeting to weigh further production increases, inflaming concerns about swelling global supplies that have dragged down crude prices this year, reports Bloomberg.
West Texas Intermediate futures slipped more than 1 per cent to trade below $59 a barrel, down about 7pc this week, after Opec+ moved up its video conference to discuss June production levels by two days to today.
An aggressive supply boost from the cartel has the potential to batter a market already pressured by soft Chinese demand and plentiful output from outside the group. Saudi Arabia was expected to steer Opec and its allies to another production increase at the gathering, and the move to an earlier meeting time outside of trading hours would allow more time for markets to absorb the decision.
“The market’s knee-jerk reaction is that the pull-forward for the call equals a pull-forward for more supply,” said Jon Byrne, an analyst at Strategas Securities. The last-minute schedule change likely signals that the cartel is accommodating the recent shift in market dynamics, he added.
Crude has shed about 18pc this year – and briefly touched a four-year low last month – as the Trump administration’s tariffs fan concerns that energy demand will fall.
The drop in prices is already showing signs of squeezing a key industry that Trump pledged to help. Some of the biggest US shale-oil producers plan to slash about 4pc of their drilling rigs by the end of the year. Chevron Corp said on an earnings call yesterday that it would reduce share buybacks, citing a softening market.
The bearish Opec+ development overshadowed earlier news that China is assessing the possibility of talks with the US that could ease the trade conflict between the two economic giants. Further support came from US President Donald Trump’s pledge to impose secondary sanctions on any nations or companies buying Iranian oil, ratcheting up pressure on Tehran as nuclear talks with Washington hit a snag.
The vow follows a similar move in early March to place ‘secondary tariffs’ on countries that obtain oil from Venezuela. Top buyers of crude from the targeted nations, like China and India, are also the epicentres of the US-led trade war, meaning the indirect penalties may exacerbate economic strain from Beijing to New Delhi.
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