Oil prices wobble as traders await OPEC, China data

31st May 2016, Comments 0 comments

World oil prices diverged Tuesday but held below the key level of $50 per barrel, as traders eyed this week's crucial OPEC oil meeting and key Chinese data.

Around 1200 GMT, US benchmark West Texas Intermediate for delivery in July rose 26 cents to $49.59 per barrel.

Brent North Sea crude for July fell 18 cents to $49.58 a barrel compared with Monday's close.

Trading volumes were still thin after British and US financial markets were shut for a public holiday on Monday.

"With OPEC also meeting later this week ... there is little expectation that oil ministers are likely to come to any agreement on production quotas or freezes," said CMC Markets analyst Michael Hewson.

"However that scarcely matters, given the current direction of travel for oil which currently looks well supported just below the $50 a barrel level."

The Organization of Petroleum Exporting Countries (OPEC) convenes Thursday in the Austrian capital of Vienna, for its first meeting with the powerful Saudi crown prince's new oil minister.

The recent recovery in prices has eased pressure on OPEC to turn down the taps at this week's scheduled output gathering, analysts say.

OPEC, which pumps around a third of the world's oil or some 30 million barrels every day, has historically responded to a fall in prices by cutting production.

But in the current cycle, which saw prices collapse from over $100 in 2014 to close to $25 this January, producers led by kingpin Saudi Arabia have changed strategy, maintaining output even with lower prices in order to pressure US shale producers.

"Although the market expects the OPEC meeting to end without reaching any agreement on production targets or production caps, oil prices have been faring well of late thanks to the high unscheduled supply outages," said Commerzbank analyst Carsten Fritsch.

Prices had topped $50 last Thursday as production disruptions in Canada and Nigeria eased short-term concerns about abundant global supplies.

However, crude futures remain less than half of their 2014 peaks due to a stubborn global supply glut.

Later this week, dealers expect Chinese manufacturing data due on Wednesday to set the tone. China is the world's largest energy consumer so any key data is also a key driver for oil prices.

The oil market had dipped on Monday after comments from the US central bank head Janet Yellen suggested interest rates could rise soon if the world's top economy continues to improve.

The expectation of a US rate hike pushed up the greenback, hurting dollar-denominated oil by making it more expensive for buyers with weaker currencies and denting demand.

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© 2016 AFP

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