Crude Oil Market Drops as Producers Fail to Meet Thursday

By Adedapo Adesanya

Oil prices fell after hitting $40 per barrel at one stage on Wednesday, June 3 for the first time since March because oil producers won’t meet this week to discuss next step to crude production cuts as expected.

The news that producers could meet this week instead of next week served as good news to investors, but oil fell when reports revealed that a meeting planned for Thursday was unlikely.

Algeria, which holds the rotating OPEC presidency, had proposed that OPEC+ hold a meeting on June 4 rather than next week. However, with a failure to meet this week, it means the meeting will go on to hold on June 9-10.

On Wednesday night, the Brent crude futures traded at $39.45 per barrel after falling by just 0.3 percent. Earlier in the session, it climbed above the $40 per barrel mark for the first time since March 6.

Meanwhile, the US West Texas Intermediate (WTI) crude futures stood at $36.75 per barrel, falling 0.11 percent after it had also risen to $37 level earlier in the session.

Oil prices had been showing better gains on the back of a potential extension to the pact between OPEC and its allies to cut crude supplies. Saudi Arabia and Russia have repeatedly agreed to extend current oil output cuts by a month in order to keep supplies short.

The alliance has also mulled a deal to extend the current level of OPEC+ cuts through to the end of 2020. This, however, has been tagged as significantly less likely than a two or three-month extension because of Russia.

Saudi Arabia and some other producers have expressed commitment to stringent cuts since the beginning of May which has assisted in the rally of prices, which began after US futures tumbled below zero for the fist time in history in April.

The demand picture is also beginning to improve as economic activities continue to pick up around the globe and many countries remove travel restrictions, which have grounded airliners and impeded shipping and road transport.

Despite the drop in gains, the crude oil market is shaping up better on the supply side as proof was provided by the American Petroleum Institute (API) which reported that crude stockpiles at the storage hub of Cushing, Oklahoma in the US fell by 2.2 million barrels per day last week.