- Oil Production Cut Extension
- Slow Uptick in Oil demand
- U.S-China Tensions Impact
Oil prices edged lower in early Monday trading session in what promises to be a defining week after a 70% plus rally from record lows. Prices were down as traders reacted to reports the Organization of the Petroleum Exporting Countries is planning to discuss further cuts to curtail a glut in supply.
Brent Crude and West Texas Intermediate crude futures were down by as much as 0.4% as OPEC considers extending the record production cut of 9.7 million barrels of output beyond the end of June.
The slight drop comes hot on the heels of oil price recording the strongest monthly gains in years in May. The 70% plus rally came as OPEC production dropped to the lowest level in two decades. Demand picking pace with the opening of world economies following the COVID-19 pandemic also continues to offer support to oil prices.
However, prices have struggled to edge past the $40 a barrel level in recent sessions amidst growing concerns that demand is not picking up as initially expected. As it stands, the 9.7 million barrel a day cut has struggled to curtail a glut in supply in the market.
Oil Prices Outlook
Oil prices could edge lower from current levels as the glut in supply amidst the production cuts continues to rattle traders in the oil markets. However, if OPEC were to come up with a three-month extension to the 9.7 million cuts, there is a likelihood that prices could rally past the $40 a barrel level.
Saudi Arabia’s one of the biggest oil producers, and a key contributor to the glut in supply is proposing extension to the record cuts to the end of the year, as a way of bolstering oil prices. However, it is yet to win the support of Russia.
The tension between the U.S China over Coronavirus as well as Hong Kong is another headwind that continues to rattle the global financial markets. Likewise, it is expected to have an impact on oil prices should tension spiral out of control.