Oil rises on stronger financial markets, expectations of extended supply cuts

Oil Slips After Industry Data Shows U.S. Supplies Building UpMore

In a monthly report, the Organization of the Petroleum Exporting Countries said world oil demand will increase by close to 1.14 million barrels per day this year - 70,000 bpd less than initially expected. "Significant downside risks from escalating trade disputes spilling over to global demand growth remain".

Oil markets are experiencing a trend reversal in May, as investors are concerned about the decline in oil demand amid worries around a global recession.

U.S. West Texas Intermediate crude futures fell $1.35, or 2.5%, to $51.92 per barrel.

As the booming American shale industry propels USA production to new records, United Arab Emirates Energy Minister Suhail Al Mazrouei even indicated that OPEC may also need to constrain supply in 2020.

At 485.5 million barrels, United States commercial stocks were at their highest since July 2017 and about 8% above the five-year average for this time of year, it said. US President Donald Trump said he was holding up a trade deal with China.

In total, OPEC crude oil production showed a drop of around 400,000 bpd previous year, compared to 2017, according to the report.

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OPEC is set to meet at the end of June though a meeting of the wider producers that agreed to the cuts, known as OPEC+, may not occur until early July.

Although OPEC reduced demand estimates for the first quarter, it kept forecasts for 2019 as a whole mostly unchanged and projects that consumption growth will accelerate during the rest of the year.

Goldman Sachs stated in a note that OPEC might extend the supply cuts due to the uncertain macroeconomic future and volatile oil production from Iran among others. The investment bank says it believes the group's core members, including Saudi Arabia and the United Arab Emirates, will take steps to keep the market from tipping into oversupply or undersupply.

U.S. crude oil production decreased slightly during the week ending June 7, the U.S. Energy Information Administration (EIA) said Wednesday. "Meanwhile, non-OPEC supply continues to increase at a high pace, while the voluntary production adjustments as per the Declaration of Cooperation (DoC) have again risen to record-high conformity levels". "This would lead to a balanced market despite the vagaries of demand and Iran/Venezuela/Libya production", Goldman said in a research note.

A week earlier, crude stockpiles had increased by 6.77 million barrels.

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