Is The Oil Price Rally Sustainable
CRUDE OIL prices continue
to battle to remain above the $50 price level but find the resistance hard to breach. Traders
remain focused on Thursday’s Producers Meeting.
Crossing the $50 mark
breaks down a psychological barrier for traders who have worried
about oil prices in recent months as the price of crude has dipped at times
below $30 a barrel. But analysts warn the rebound could be temporary if the spike in prices leads to
increased oil production.
Prices have risen in part due to a slowdown in production in Canada where a wildfire
looms near oil production facilities as well disruptions to the supply from Nigeria as well as in Venezuela, where an economic crisis has led to massive power cuts.
Meanwhile Argentina
aims to eliminate its need for crude imports while increasing domestic
oil output to 653,000 barrels per day (bpd) in 2025, a 23 percent increase from
2015, an official from the
Energy Ministry said last week.
China's crude oil purchases
from Russia jumped 52.4% year on year to a record high in April, propelling it to the top
spot for the second time in 2016 and displacing Saudi Arabia, but May purchases
from the European supplier could slow because of higher flat prices,
traders said.
Russia shipped 4.81 million mt, or 1.17 million b/d, of crude to
China in April, about 36,910 b/d higher than the last peak.
Higher prices could
encourage more producers to turn up output — particularly the more cost-sensitive U.S. shale producers
— and present the world with another wave of oversupply.
The OPEC meeting is only a
week away, but the chances of a positive result are as remote as ever. Rising oil prices, the heightened rivalry between
Saudi Arabia and Iran, and Saudi Arabia’s willingness to go it alone will make a deal all but impossible.
According to the IEA, Iran has managed to boost oil production to
3.56 million barrels per day in April, its highest level since November 2011.
Oil exports also jumped 600,000 barrels per day to 2 million barrels per day. Importantly, Iran’s output now stands at
pre-sanctions levels, a key threshold that the Iranian government says it needs
to reach before it would consider any cooperation on production limits with OPEC. However, Iran thus far does not see it that way, insisting
that it still has more ground to make up.
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