Oil prices back in the $40s, sink to 5-month low

Andrew Cummings
May 19, 2017

WTI futures for June delivery were marked 1.4% lower at $44.93 each in early European trading, after hitting a six-month low of $44.14 in overnight Asia trading, as investors adjust to a glut in supplies and speculation that OPEC members won't agree to further production cuts later this month. Brent contracts for the same month, the global benchmark, were trading 1% lower at $47.90 each but traded as low as $47.05 during Asia hours.

The US data and some investors "losing faith with Opec" are not helping the oil price, said Abhishek Deshpande, an oil analyst at Natixis.

After falling nearly 5 per cent yesterday, both contracts continued to collapse overnight with WTI falling to US$43.76, its lowest since November 15, and Brent down to US$46.64, its lowest since November 30 when the Organization of the Petroleum Exporting Countries (Opec) agreed to cut production during the first half of 2017.


USA oil production is increasing and the drawdown on the USA crude stock came in at 930000 barrels less than half of the 2.3 million barrel reduction that had been anticipated, a factor which may soften demand.

Hong Kong's benchmark Hang Seng index lost 1.2 percent to 24,396.85 while the Shanghai Composite index in mainland China shed 0.7 percent to 3,104.02.

According to the secretariat of the Organisation of Petroleum Exporting Countries (OPEC), the average price of 13 variants of crude oil, including Nigeria's Bonny Light, stood at $47.44 per barrel at the close of trading on Thursday. The price recovered somewhat over the course of 2016 to just under $57 by the end of the year. This is higher than OPEC achieved during its last cut in 2009. At the next meeting on May 25, the cartel will decide whether to expand their agreement to lower crude production.


Oleg Yakushev, an expert of investment company ZERICH Capital Management, thinks that the OPEC countries, which are going to make in three weeks a decision on the fate of the moratorium, will take into account their own interests and not the interests of Russian Federation or the U.S. He added that continued growth in China, where there are no signs of a hard landing yet, as well as Japan, the euro zone and the United States, should keep oil demand strong.

The recent tripling in profits at BP - during the first quarter of this year - seemed to support a wider narrative that the oil majors were seeing a lift in profits on the back of the rises in the oil price. "The price drop is a setback for a sector that is still waiting to see daylight".

This sector contributes 10 per cent of Singapore's manufacturing activity and roughly 2 per cent of overall economic output, he added.


Other reports by iNewsToday

FOLLOW OUR NEWSPAPER