Crude Oil Prices Remain High as OPEC Set to Extend Output Cuts
Oil prices have remained high at the beginning of this week. WTI Crude was trading around the $63 mark at the time of writing. This comes after a weekend in which leading figures from major oil-producing nations hinted at extending output cuts. These cuts have seen prices rise by around $20 per barrel this year to the six-month highs currently seen.
Trump Snubbed by OPEC Again?
Top analysts have speculated that the OPEC+ group; that is the OPEC and its group of allies led by Russia, will delay its scheduled June meeting for one month. This would allow oil producers to take a look at more data before making a decision on whether or not to continue with a reduced output.
From a US perspective, President Trump has been lobbying for an increase in output. This would help to offset the upward pressure which his foreign policy has placed on the oil price. US sanctions on Venezuela and Iran have not only ratcheted up pressure on OPEC and the Middle East but also led to a higher fuel price in the US.
These efforts have so far been ignored, and two of the major OPEC allies have not yet committed to increasing output. Saudi oil minister Khalid al-Falih seemed to signal that OPEC was happy with the current output levels and had no plans to change. This would be another major snub for Trump, and almost certainly heap pressure on the US economy.
The US Economic Impact
The Trump administration is well-known to favor a lower oil price. This would help to reduce the cost of imports and manufacturing, as well as the price at the pumps. A higher price meanwhile, would increase the cost of production for domestic firms and could lead to the loss of jobs in some cases.
These are all reasons why the President has lobbied allies in Saudi Arabia and UAE to increase oil output and keep costs down. This is all happening amid an already tumultuous time for the US economy given the ongoing trade war with China.
The situation is very difficult, however, and with Iranian and Venezuelan outputs shut down to practically zero, the US is relying heavily on the other major producing nations to increase production when they do not necessarily have to.
How High Will Oil Prices Go?
The market has been volatile of late. Much of this has to do with the geopolitical climate. WTI Crude did break through significant resistance levels today however. This break of the $63.66 level was short-lived. There is strong support at the 50-day EMA level of $61.77 though.
Much of where the price goes during the second half of the year will be determined by the upcoming OPEC meeting. The major producing nations are also said to be considering plans to ease the output cut by as much as 300,000 barrels per day. This would help to at least temporarily relax the price.