More OPEC comments, oil rigs up; expect volatility up to OPEC meeting

By A/S Global Risk Management.

Michael Poulson, Global Risk Management. Image credit: Global Risk Management

Updated on 04 Jun 2018 07:34 GMT

Energy ministers from the OPEC nations Saudi Arabia, UAE, Kuwait, Algeria and Oman held an unofficial meeting in Kuwait this Saturday discussing market conditions. According to Bloomberg, a statement released on Sunday said the ministers: "emphasized the need for healthy market conditions that stimulate adequate investments in the energy sector, in order to ensure stable oil supplies are made available in a timely manner to meet growing demand and offset declines in some parts of the world". Together with the meeting prior to this weekend, this is the first time in a while that Saudi Arabia - which is the leading oil producer in OPEC - appears in talks about accommodating rising global oil demand and offsetting declining supply. Such a statement further increases the probability of OPEC increasing crude output as Russia and Saudi Arabia late May discussed increasing output by 1 mbpd. The official state of the production cut agreement is that it is planned to last throughout 2018, but on top of these latest statements the market seems increasingly uncertain about it. Therefore, all eyes are likely on the next official OPEC meeting 22nd of June.

The last two weeks have been quite the volatile ones as the market finds it difficult what to expect of the statements coming from OPEC+, resulting in a market likely to sustain such volatility until further clarifications on the matter arise.

Meanwhile in the US; rig counts and production are increasing but with transportation infrastructure having a hard time keeping up as bottlenecks are arising. However, there are new transportation capacity looking to go online during next year which OPEC must consider when they discuss whether to increase output or not.

Until the OPEC meeting the market is likely going to be volatile and looking for any hints about what OPEC+ is going to do.

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