Oil in the Shadow of the OPEC Summit
This morning crude oilprices are hovering near $83/bbl with a marginal move up of 0.20 percent from yesterday’s closing. Today is very crucial day for the oil futures as market is eyeing for the OPEC meet result on production quota. In addition to this, economic concern from Euro-zone is weighing on global financial market and creating speculation of lower demand.
Earlier today, Japanese production figures were released showing a drop in production with the report coming in well under forecast. The contagion from EU and the ongoing economic downturn is effecting the global economy. Lower production means less demand for energy, in turn lower demand for crude oil hence lower prices
Ahead of the OPEC meeting today, oil prices are expected to remain sluggish with the question of rising, cutting or keeping the production quota by OPEC members. As per OPEC monthly report, world market is well supplied though the production fell in May to 31.58 from 31.64 million barrels per day. In one side, Saudi Arabia, Qatar and UAE would like to raise the output and on the other side, Venezuela, Iraq, Angola and Iran are warning global crude supply excessive. Thus, oil prices may remain volatile; ahead of OPEC meet which result is uncertain. As per government report from US Energy department, crude oil stocks have declined by 300K barrels in the last week in WTI delivery centre. Thus, fall in inventory level may support oil prices. From economic point, most of the Asian equities are trading down driven by lower sentiment from Euro-zone basically. Moody has downgraded Spain by three notches on yesterday. Ahead of Italy bond auction due for today and Greece election in the weekend, economic concern may continue to pressurize oil prices. From US, economic releases in the form of Consumer Price index are expected to fall which may paint a slight positive picture of the economic growth. But other data like weekly jobless claims may keep sentiment weak. So, we may expect oil prices to remain under pressure driven by above factors.
Currently, gas futures prices are trading below $2.193/mmbtu with marginal gain of 0.20 percent in electronic trading. The U.S. Energy Information Administration lowered its estimate for domestic natural gas production growth in 2012 for a second straight month but still expects output this year to be up 3.4 per cent from 2011’s record levels. So, in one side lower production estimate may support gas to trade on higher side, where lower demand may limit the gains. As per US Energy department, natural gas storage is likely o increase by 75 BCF, which may add pressure on gas prices. Most importantly, As per National Hurricane Centre, as of now there is no tropical storm formation is seen in North Atlantic region. Normal temperature in consuming region of US, may pressurize gas demand for the day.