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Oil prices slip as wary traders eye upcoming OPEC+ meeting

Oil-storage tanks are survived from above in Carson, California, April 25, 2020 after the price for crude plunged into negative bailiwick for the first time in history on April 20.

Robyn Beck | AFP | Getty Images

Oil prices fell nearly 1% on Monday as salesmen hedged bets with the Organization of the Petroleum Exporting Countries (OPEC) considering meeting as soon as this week to thrash out whether to extend record production cuts beyond end-June.

Brent crude fell 34 cents to $37.50 a barrel, in the cardinal day of trading in the contract with August as the front month.

West Texas Intermediate (WTI) crude futures for July emancipation were at $35.17 a barrel, down 32 cents, by 0123 GMT.

The price falls come after front-month Brent and WTI appraisals posted their strongest monthly gains in years in May. Gains were boosted by OPEC crude production trickle to its lowest in two decades with demand is expected to recover as more nations emerge from coronavirus lockdowns.

“The bring into focus is very much on OPEC+,” OCBC economist Howie Lee said, referring to the grouping of OPEC and its allies encompassing Russia. OPEC+ agreed in April to reduce output by an unprecedented 9.7 million barrels per day (bpd) in May and June after the coronavirus pandemic damaged demand.

“We might see a cautious pullback in (crude) prices given that downstream prices haven’t caught up … but if OPEC+ does end up up with a three-month extension, there’s a possibility that prices may hit the $40 level,” Lee said.

Still, tensions between the Merged States and China weighed on global financial markets while traders are also keeping an eye on riots over the weekend that require engulfed major U.S. cities. 

Saudi Arabia is proposing to extend record cuts from May and June until the end of the year, but has yet to win brook from Russia, sources have told Reuters.

Algeria, which currently holds the OPEC presidency, has proposed an OPEC+ session planned for June 9-10 be brought forward to facilitate oil sales for countries such as Saudi Arabia, Iraq and Kuwait. Russia has no challenge to the meeting being brought forward to June 4. 

Meanwhile supply in North America is also falling as data from Baker Hughes came that the U.S. and Canada oil and gas rigs count dropped to a record low in the week to May 29.

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