Oil prices rebounded Tuesday, loosely tracking a recovery in equities, but were held in check by uncertainty surrounding a key supply decision by OPEC and its allies.
“With bulls lacking a major catalyst, the market could remain in a funk until month’s end as [the Organization of the Petroleum Exporting Countries’] production restrictions vie with continued uncertainty over U.S.-China trade tensions,” said Stephen Innes, managing partner at Vanguard Markets, in a daily note.
Oil futures finished lower on Monday as investors focused on worries about slowing global growth after weaker import data from China and doubts about Russia’s willingness to extend production curbs beyond their expiration this month. The Trump administration’s decision to call off plans to raise tariffs on Mexican goods has so far underpinned bullish sentiment for oil prices.
West Texas Intermediate crude for July delivery CLN19, +0.24% on the New York Mercantile Exchange gained 25 cents, or 0.5%, to $53.51 a barrel, while August Brent crude BRNQ19, -0.21% rose 21 cents, or 0.3%, to $62.50 a barrel on ICE Futures Europe.
Crude has moved in relatively choppy fashion after the U.S. benchmark last week fell by at least 20% from a recent peak, meeting the widely accepted definition for a bear market.
“The rebound in recent sessions had been attributed to the U.S./Mexico deal on the border to avoid tariffs, improved overall sentiment and suggestions from Saudi Arabia that an extension was effectively guaranteed,” said Craig Erlam, analyst with Oanda. The Dow Jones Industrial YMM19, +0.07% DJIA, +0.24% and the S&P 500 index ESM19, +0.11% SPX, +0.26% on Tuesday climbed, extending a multi-day rally.
“The latest stumble may prove to just be some early profit taking but there is a feeling that there’s more to it,” Erlam said. “There still appears to be little idea of how much Russian involvement there will be in an extension and with the date of the OPEC+ meeting now looking like early July, perhaps producers are looking to make a decision with one eye on the outcome of the Trump/ Xi meeting.”
Uncertainty remains around Organization of the Petroleum Exporting Countries extending an agreement to curb output that took effect at the beginning of the year. Russian Energy Minister Alexander Novak on Monday said he couldn’t rule out a scenario in which oil falls to $30 a barrel if a global agreement wasn’t extended, according to Reuters.
OPEC members pumped 30.09 million barrels a day in May, the lowest since February 2015, before Gabon, Equatorial Guinea and Congo joined the group, though Qatar was still a member at the time, according to an S&P Global Platts survey. Saudi production fell to 9.7 million barrels a day—the lowest since January 2015 and Iraqi output jumped to an all-time high of 4.82 million barrels a day, the survey showed.
Weekly U.S. petroleum supply figures are due early Wednesday from the Energy Information Administration. Analysts polled by S&P Global Platts expect to see a slight rise of 80,000 barrels in crude supplies for the week ended June 7. Gasoline stocks are seen down by 380,000 barrels, while distillates are likely to have climbed by 704,000 barrels, the survey said.
Separately, the EIA’s monthly energy report will be released later Tuesday and include the agency’s latest forecasts for crude prices and production. Monthly oil reports from OPEC and the International Energy Agency will be release on Thursday and Friday respectively. The IEA’s report will include forecasts for 2020.
In other energy trading, July gasoline RBN19, +0.87% rose 1.2% to $1.750 a gallon, while July heating oil HON19, +0.35% rose 0.5% to $1.816 a gallon.
Natural gas for July delivery NGN19, +0.13% traded at $2.350 per million British thermal units, up 0.3%.