02 June 2015 – Crude oil dipped on Tuesday on expectations that Opec would not cut output at its meeting this week, but firm refinery demand curbed price losses.
Front-month Brent crude futures had fallen 10 cents to $64.78 per barrel early on Tuesday, while US crude was down 5 cents at $60.15 a barrel. Those slight declines extended a 1% drop from the previous session.
“Investors remained cautious heading into the Opec … meeting this Friday, with Brent coming under the most selling pressure,” ANZ bank said on Tuesday.
US bank Citi said it saw “a strong consensus for a quota rollover at Friday’s summit”.
High Opec production, but also from US shale producers and Russia, has contributed to oversupply and left tankers filled with millions of barrels of oil without buyers. But prices were prevented from falling further on Tuesday as Saudi oil minister Ali al-Naimi said overnight that demand would pick up and tighten the market in the second half of the year.
“Comments from Saudi Arabian oil minister Ali al-Naimi were characteristically upbeat, acknowledging a current surplus in the market, but anticipating stronger second half demand and an eventual rebalancing of the market,” Citi said in a note responding to his comments.
Naimi was the key architect of Opec’s decision at its last meeting in November 2014 not to cut crude production despite a growing global glut, exacerbated by a boom in US shale oil, triggering sharp oil price falls.
Analysts said that prices were also receiving some support from firm refinery demand.
“Refineries are on the cusp of higher crude runs as we approach 3Q2015. On balance, we think any short-term price weakness will be dissolved by the pickup in end-user demand, higher runs and shrinking US supply growth,” JP Morgan said in its latest monthly oil report.
The dollar remains near one-month highs against a basket of currencies as expectations of an interest rate hike from the Federal Reserve this year remain high, while the euro is under pressure from Greece’s financial crisis and soft euro zone data.