OPEC rumors from the U.S. drive oil prices lower

Traders may be more focused on production levels than inventories at this point, a futures analyst said.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |  June 5, 2018 at 9:52 AM
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June 5 (UPI) -- A U.S. call for more oil from OPEC and a negative trend line for the price of Brent crude oil helped lead oil prices toward a second day of declines on Tuesday.

The price of oil opened the week lower amid concerns about the impact of trade disputes between the United States, China and Europe on the global economy. Some of the tariffs imposed by U.S. President Donald Trump could make a variety of goods more expensive and crimp consumer spending.

Higher retail gasoline prices, meanwhile, are hurting U.S. consumers. According to some analyses, U.S. consumers are paying about a quarter million dollars more per day for gasoline than they were last year, dampening some of the impacts of U.S. President Donald Trump's tax reform.

According to a report published Tuesday by Bloomberg News, the U.S. government has issued a direct appeal to Saudi Arabia and other members of the Organization of Petroleum Exporting Countries to put more oil on the market.

Giovanni Stauvano, a commodity analyst at UBS, told UPI the U.S. intervention was likely pulling the price of oil lower early Tuesday.

"The Bloomberg story saying the U.S. has requested more oil from some OPEC nations has initiated the price drop," he said. "The break of technical levels -- for example, Brent below the 50-day moving average -- has likely amplified the drop."

The price for Brent crude oil was down 1.16 percent as of $74.42 per barrel as of 9:15 a.m. EDT. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 0.29 percent to $64.56 per barrel.

This is not the first time OPEC members have suggested U.S. concerns were a motivating factor. It's unclear, however, why the Trump administration would reach out to OPEC given it's strategy of energy dominance and concerns about foreign market shocks. Trump has complained, meanwhile, that OPEC was inflating the price of oil through artificial means.

U.S. crude oil production broke a record last week at 10.47 million barrels per day. OPEC, for its part, is considering a relaxation of compliance with an effort to drain the surplus of oil on the market because of steady declines from Venezuela and potential declines from Iran.

Elsewhere, analysts surveyed by commodity pricing group S&P Global Platts said they expected the U.S. market to show crude oil stock levels dropped 1.3 million barrels last week. That would normally trigger a spike in crude oil prices, though Platts Futures Editor Geoffrey Craig said traders are focused more on production levels.

"The relentless climb in U.S. production has also taken the spotlight away from US oil inventories, which still paint a strong picture," he said in a weekly emailed report. "U.S. crude stocks have been at a deficit to the five-year average for seven straight weeks, having erased a surplus of 25 percent seen in mid-September."

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