Oil prices fell again despite a fifth straight weekly drop in US crude inventories, as traders await a widely expected decision by the organization to maintain their current output levels despite worries over a global glut.
Market analysts don’t expect a change in the cartel’s strategy of flooding the market with oil to maintain its third share as opposed to cutting output to support oil prices.
“Although surprises from OPEC can never be ruled out, prospects for a policy reversal at this time range from slim to non-existent. Saudi Arabia and its Gulf allies, which last November instigated the policy of defending market share instead of prices, appear resolved to persist with it,” Bhushan Bahree, senior director at IHS Energy., told Fox Business.
Light sweet crude for July delivery ended the day $1.64 or 2.77% lower at $58.01 a barrel on the New York Mercantile Exchange.
Brent futures, the global benchmark ended $1.77 or 2.8% lower at $62.03 a barrel on the London ICE futures Exchange.
The Organization of Petroleum Exporting Countries, during its meeting in Vienna Austria, is expected to keep its crude output levels flat at 30 million barrels per day failing to heed calls by some producers to cut supply.
Market analysts say that the cartel is flooding the market with 2 million barrels per day more than it should.
“Despite [the inventory decline], market sentiment turned bearish on…news of OPEC most likely keeping output unchanged at tomorrow’s meeting, “Michael Poulsen, oil analyst at Global Risk management, told the Wall Street Journal.
“A roll-over in OPEC’s production target is built into prices, given the exciting fundamental backdrop, volatility is all but guaranteed.”
A report by the government-backed Energy Information Administration showed that US inventories fell by 1.9 million barrel in the week ending May 30th,a fifth straight weekly drop, although total stockpiles remained at an 80 year high.
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