Oil rises on supply cuts, but weak economy holds market back

Andrew Cummings
June 11, 2019

While most members are said to be onboard, Russian Federation is still considering supporting cuts that have been in place since the start of the year and while they recognise the risks of over-production, energy minister Novak said that Russian Federation would look at how events develop through June before committing to a further extension. USA tariff threats on two countries might have a severe impact on the global growth and hamper the demand prospects for Crude.

Front-month Brent crude futures, the global benchmark for oil prices, were at $63.71 at 0017 GMT, 42 cents, or 0.7%, above Friday's close.

U.S. West Texas Intermediate (WTI) crude futures were at $54.32 per barrel, 33 cents, or 0.6%.

Earlier, Russian Finance Minister Anton Siluanov said that the price of oil could drop to $30 a barrel if OPEC and its partners fail to agree on extending the production cuts that now expire at the end of June.

"Brent futures continue rising ... after the Saudi Arabian energy minister expressed confidence that OPEC+ producers will prolong their output cuts programme through the second half of 2019", said Han Tan, analyst at futures brokerage FXTM.

President Vladimir Putin said last week that Russian Federation and the Organization of the Petroleum Exporting Countries disagreed over what constituted a fair oil price, but that they would decide at the meeting. Optimism on Brent crude, the global benchmark, declined by the most this year. -China trade tensions continued to threaten demand for crude.

Stock markets jumped on Monday after a deal between the United States and Mexico to combat illegal migration from Central America late last week averted a tariff war between the neighbors.

Barclays bank, in a note, said its economists had revised down their GDP growth outlook for the United States, China, India and Brazil - countries that account for more than three-quarters of their oil demand growth assumptions for this year.

He said while Opec was close to agreement, more talks were needed with non-Opec countries which had agreed effective this past January 1, to slash output by 1.2 million barrels per day (Mmbpd), which expires the end of this month.

Slowing demand has also contributed to a slump into negative territory in refining profits for Asian naphtha, an important feedstock for the petroleum industry, to levels not seen in over a decade.

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