Oil traded near $65 a barrel as investors weighed flaring Middle East violence against signs that Opec’s production policy will keep the global market amply supplied.
Futures were little changed in London after rising 0.2 per cent Monday. Iraq’s prime minister pledged a swift takeover of the city of Ramadi from Islamic State militants, while in Saudi Arabia, King Salman vowed to punish those responsible for a suicide attack on Shiite worshipers. Opec will probably maintain its output quota at a June 5 meeting, a Bloomberg survey shows.
Oil’s recovery from a six-year low in January is stalling this month amid speculation a global glut will persist. Opec, which pumps 40 per cent of the world’s crude, is seen sticking with its strategy of favouring market share over supporting prices, while US supply remains near a record.
“The market is getting a bit jittery with the Opec meeting coming up, which will probably be no change to the output ceiling,” David Lennox, a resource analyst at Fat Prophets in Sydney, said by phone. “If the oil price does rally, we’ll probably see US domestic production come back on stream and we’ll go through the whole cycle again.”
Brent for July settlement was at $65.51 a barrel on the London-based ICE Futures Europe exchange, down 1 cent, at 1.23pm Sydney time. The contract climbed 15 cents to $65.52 on Monday. Total volume was about 80 per cent below the 100-day average. The European benchmark crude traded at a premium of $5.70 to West Texas Intermediate, the US marker grade.
WTI for July delivery was at $59.81 a barrel in electronic trading on the New York Mercantile Exchange, up 9 cents from the May 22 close. There was no floor session Monday because of the Memorial Day holiday and transactions will be booked Tuesday for settlement purposes. Prices, little changed in May, have gained 12 per cent this year.
Iraq will retake Ramadi, about 70 miles (113 kilometers) west of Baghdad, “within days”, the prime minister Haidar Al-Abadi told the BBC in an interview on Monday. Forces were gathering in preparation for the offensive, according to Jafer al-Husseini, a spokesman for a pro-government Shiite militia group.
In Saudi Arabia, ISIL claimed responsibility for the Friday bombing that killed 21 in the oil-rich Eastern Province. The attack comes as the kingdom leads a military intervention against Shiite rebels in Yemen and participates in US-led operations in Syria.
Saudi Arabia, Opec’s biggest producer, led a November decision by the group to maintain its output quota at 30 million barrels a day. Its 12 members pumped 31.3 million a day in April, exceeding that target for an 11th consecutive month, a Bloomberg survey of companies and analysts showed.
US crude inventories were at 482.2 million barrels in the week ended May 15, more than 100 million above the five-year average for this time of year, according to the Energy Information Administration. While the nation’s rig count has fallen by more than half since December, production remains near the fastest pace in more than 30 years.
In China, president Xi Jinping said strategic oil reserves are significant to the country and called for an increase in stockpiles, the official Xinhua News Agency reported on Weibo, citing his comments during a visit to Zhejiang province. The nation is the world’s largest oil consumer after the U.S.
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