The price of OPEC's oil basket, which is made out of 14 different blends, fell to US$42.58 a barrel yesterday, below the closing price of West Texas Intermediate for the same day, which was US$42.78 a barrel. The Thursday closing price for the OPEC basket was a decline from the US$43.14 at which it settled on Wednesday.
Today, however, WTI and Brent, the international benchmark, inched up on the second consecutive weekly U.S. inventory draw, as reported by the Energy Information Administration and on signals from OPEC that its members are sticking to their production cut quotas, recently extended.
According to the monitoring committee set up by the cartel to track compliance, its rate reached 106 percent last month, which lacks any real significance in light of the fact that overall, OPEC production in that month increased-for the first time this year-on the back of ramp-ups in Libya and Nigeria. The May output was 336,000 bpd higher than the figure for April, with the total at 32.14 million bpd.
None of the latest production figures for OPEC or the U.S. bode well for those with expectations of higher prices. In fact, as one analyst from Oanda told MarketWatch, "Brent and WTI may be higher for a second day but as it is, there's little reason to believe this is anything more than a dead cat bounce and that next week may be another painful one." Related: What Does Bin Salman's Rise Mean For Oil?
Craig Erlam, senior market analyst at the online trading provider, added that "Traders are clearly unconvinced by the cuts that are intended to bring inventories down to their five year average, particularly against the backdrop of rising output from the U.S., Libya and Nigeria. A clear break below $44.50 in Brent and $42 in WTI could trigger further downside for oil, with $40 being the next big test."
Earlier this week, Iran's Oil Minister Bijan Zanganeh suggested that OPEC may be considering deeper cuts, which is what traders and investors had expected along with the deal extension. No other members of the cartel have confirmed the discussion yet.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More