$100 Oil-Price Spike Would Trigger Recession in Crude Reality

Gladys Abbott
May 25, 2018

The energy sector and oil prices pulled backed after Saudi Arabian oil minister Khalid al-Falih on Friday said he would enter into discussions in June with other OPEC members and external producers such as Russian Federation to relax the output caps, the Wall Street Journal reports. OPEC agreed to slash the output by 1.2 million barrels per day from January 1.

"We still believe that a production increase will still be forthcoming that will become official at next month's Opec meeting", Jim Ritterbusch, president of Ritterbusch and Associates, said in a note. The oil-rich nations will also discuss ramping up production.

"A 5.8 million-barrel build is kind of like a slap in the face, where it's like, 'Where did this oil come from?' And as you look through the numbers, it doesn't make a lot of sense", said Phil Flynn, analyst at Price Futures Group in Chicago.

OPEC and some non-OPEC major oil producers are scheduled to meet in Vienna on June 22.

More news: GDPR takes effect: What you need to know

"If prices get above there, that will further intensify and increase the likelihood that OPEC will do something".

OPEC ministers have been trying to play down fears over supply risk in recent weeks, with Saudi energy minister Khalid al-Falih and OPEC president and UAE energy minister Suhail al-Mazrouei saying the oil market remains well-supplied, with the recent price rise driven by geopolitics, not fundamentals. "It's going to be very hard to overcome this level on a sustainable basis before the OPEC meeting". "But generally we intend to continue the cooperation", Novak said. At the auction the previous day, the price decreased by $1,01 (1,27%) and has made on closing of $78,79 per barrel.

"It does seem like any move above $80 attracts selling interest right now and that could potentially lead us to a period of consolidation, where I think $77.50 or even $75 might be in focus", Saxo Bank senior manager Ole Hansen said.

While Trump has criticized OPEC on many issues since taking office, including artificially boosting prices, his general mindset seems to be that higher prices benefit industry; and that point was reiterated by the Canadian CBC news agency, which on Wednesday stated that "Higher oil prices are doubly helpful for Canadian producers, because they are priced in USA dollars, while Canadian companies book most of their expenses in Canadian dollars".

Other reports by LeisureTravelAid

Discuss This Article