Oil Prices Fall as Russia Casts Doubt On Extending Output Cuts
Investing.com - Crude prices were volatile on Monday as uncertainty over whether Russia would agree to extend production cuts jostled with fears of conflict in the Middle East - all against the backdrop of a worsening trade dispute between the world's two biggest oil consumers.
West Texas Crude oil futures for July slipped 0.2% to $62.82 a barrel as of 8:55 AM ET (12:55 GMT), down from a two-and-half-week high of $63.81 earlier, as traders priced in the latest twists in the U.S.-China trade conflict, widely seen as one of the biggest risks to the world economy. Brent crude futures, the benchmark for oil prices outside the U.S., inched up to $72.22 a barrel.
Prices were supported by a consensus at a weekend meeting in Jeddah, Saudi Arabia, that OPEC, Russia and other exporters would need to keep some sort of output restraint in place after their current deal expires at the end of June. However, they were undercut slightly by reports that Russia had suggested raising the agreed output ceiling by some 700,000 barrels a day. Russian oil minister Alexander Novak told Bloomberg that an extension of the current arrangements is only one of various options under consideration.
The group agreed in January to cut output by 1.2 million barrels per day (bpd) to stop a new global glut from forming.
The fate of the OPEC+ deal is pivotal to global oil market: prices would face a double-whammy if the deal breaks down completely at the same time as global demand weakens due to the U.S.-China trade conflict.
Data from the CFTC on Friday indicated that hedge funds had reduced their bets on higher oil prices for the third straight week last week.
However, one factor still supporting prices is the increasingly shrill rhetoric from the U.S. and Iran. Iran’s Foreign Minister Mohammad Javad Zarif accused President Donald Trump of distributing “genocidal taunts” via Twitter over the weekend, adding that he should “try respect.”
Trump had warned also via Twitter, that “If Iran wants to fight, that will be the official end of Iran. Never threaten the United States again!”
Russia is also struggling with contaminated oil in its export pipeline which has caused two major companies in Europe to stop payments to the Russian companies that supplied the oil.
In other energy trading, Gasoline RBOB Futures fell 0.7% to $2.0314 a gallon, while heating oil slipped 0.6% to $2.0828 a gallon. Natural gas futures surged 1.7% to $2.675 per million British thermal units.
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