Oil prices rose on Monday ahead of an OPEC meeting this week and as investors assessed the impact of a trade dispute between the United States and China, Reuters reported.
U.S. light crude oil CLc1 hit a two-month low of $63.59 a barrel but then recovered strongly to trade at $65.40, up 34 cents, by 1350 GMT. Brent LCOc1 to a high of $74.59 a barrel and was trading at $74.50, up $1.06, by 1350 GMT.
Brent hit a 3-1/2-year high above $80 a barrel in May but has since fallen on reports that top suppliers Saudi Arabia and Russia will increase production.
“Oil prices are reversing this morning’s bout of weakness as bottom pickers enter the fray ahead of this week’s crucial OPEC/non-OPEC meeting,” said Stephen Brennock, analyst at London brokerage PVM Oil Associates.
The Organization of the Petroleum Exporting Countries, de facto led by Saudi Arabia, and some allies including Russia have been withholding output since the start of 2017.
They will meet in Vienna on June 22 to decide forward production policy, with Russia and Saudi Arabia pushing for higher output.
All oil market eyes are now focused on OPEC, Commerzbank commodities analyst Carsten Fritsch said:
“That production will be increased in the second half of the year is considered certain – the only question is by how much.”
Despite this, Goldman Sachs said “the oil market remains in deficit ... requiring higher core OPEC and Russia production to avoid a stock-out by year-end”.
The bank said it expected OPEC and Russian output to rise by 1 million barrels per day (bpd) by year-end and by another 0.5 million bpd in the first half of 2019.
Adding extra pressure is a trade dispute between the United States and other major powers.
U.S. President Donald Trump last week pushed ahead with tariffs on $50 billion of Chinese imports, starting on July 6.
China retaliated by imposing import duties on U.S. products, including crude oil.
Benjamin Lu of brokerage Phillip Futures said Beijing’s retaliation had spooked oil investors: “These punitive measures on bilateral trade have unnerved investors as it hurts global economic growth.”
U.S. bank Morgan Stanley said in a note to clients that the trade spat meant that economic “downside risks have risen”.
U.S. oil exports have boomed in the last two years as shale oil production has surged, with China becoming one of the biggest buyers.
Additional reporting by Henning Gloystein in Singapore; editing by Louise Heavens
