According to the news report by Bloomberg, the price of oil on the WTI (West Texas Intermediate) benchmark gained as much 1.7% after Saudi Arabia as well as other OPEC+ members indicated that oil supplies were going to be constrained for the rest of the year. Tensions between the US and Iran also increase after American President Donald Trump threatened the oil major via a Tweet.
Last week, oil futures had already seen gains of 1.8%. And today, those prices went up another 1.7%. Khalid Al-Falih, the Saudi Arabia minister for energy pushed members of the oil alliance meeting in Jeddah to continue with the planned oil cuts.
Added to that, just a few weeks after the US increase its pressure on sanctions against Iran’s crude exports, Trump tweeted that if Iran was looking for a fight, it would be the official end of the country.
Saudi Arabia stated that it did not want a war with Iran, however, if the country decided to initiate one, then the kingdom would respond.
Since the beginning of the year, the price of oil has gone up by 40% thanks to supply cuts in oil production. The supply cuts superseded the trade tensions between the US and China, thereby allowing the price of oil to increase.
Oil producers have had to balance wanting high prices for crude oil with needing to fill gaps in supply caused by geopolitical tensions in the Middle East as well as supply disruptions from oil producing majors such as Libya, Iran and Venezuela.
After the meeting of the OPEC allies in Jeddah, Al-Falih told reporters that they needed to stay the course for the coming weeks and months. He said that Saudi Arabia was not fooled by the current prices and believed that the crude oil market was still fragile.
The Russian minister for energy Alexander Novak, however, sent out mixed signals. Novak stated that Russia was willing to ease up on the oil production cuts if the markets needed more crude oil. However, he said that his country would comply with any limits in output agreed upon by all OPEC allies for the latter half of 2019.
Japan Oil, Gas and Metals National Corp.’s chief economist Takayuki Nogami stated that the price of crude oil was going up because investors were of the opinion that OPEC wanted to cut down on supply so that current prices could be maintained. However, OPEC+’s final decision on production cuts would be announced in June.
The WTI crude oil for June delivery saw gains of as much as $1.05 to trade at $63.81 a barrel on the New York Mercantile Exchange. Added to that, the futures contact also trade at $63.60 a barrel in Singapore at 12:26pm today. It was this contract that also gained 1.8% last week, which is the biggest weekly increase it has seen since April earlier this year.
While the June contract expires on Tuesday, the more actively traded contract for July delivery saw its prices go to $63.96 a barrel.
The international benchmark for crude oil, the Brent International saw its futures for July delivery go up by $1.02 to trade at $73.23 a barrel in London on the ICE Futures Exchange. This contract had gained 2.3% last week.
The Brent contracts were trading at a premium of $9.46 to the WTI futures for the same month.
Despite the gains shown by both the benchmarks, money managers cut their bullish outlooks on them, as well as on CFTC futures and options as well as ICE Futures Europe. This was seen in data taken from four contracts.