Oil quotes have dropped today in the Asian market in the run-up to tomorrow's Opec meeting in Vienna that is not expected to change the cartel's policy.
UAE Energy Minister Suhail Al Mazrouei announced on Tuesday that oil markets were corrected independently, as it had been expected in the cartel. Nigeria's oil minister has reported as well that the market balance is recovering in a natural way and oil exporting countries do not have to take any urgent actions, unlike the situation in Doha. Venezuela's oil minister said that the refusal to cut oil production was an inefficient strategy.
US oil stocks have been decreasing for a several weeks in a row. The US Department of Energy will publish weekly data on oil stocks on Thursday, and many oil analysts think that US commercial oil reserves reduced by 3.1 million barrels in the period from 21st to 27th May. The stocks reduction is caused by oil supply outages in some regions, including Canada, the closest region to the USA and the biggest oil producer.
US oil production has been decreasing again and again. Oil supply become more restrained because of a reduction in investments. Oil production in the USA dropped by 0.1% to 9.1 million barrels in March, which is a 5.4% decrease as compared with the year-ago value. Oil production in China dropped by 5.6% in April.
These statistics support oil prices, but there is still a risk that an oil price growth may encourage US shale oil producers to boost production, which will make the prices skid again. Supply outages are actually a temporary factor. Forest fires in Canadian province Alberta and domestic tensions in Nigeria have provoked oil price growth. However, oil supplies from these 2 countries will resume at the same level.
At the same time, oil production continues to increase in Iran, Iraq and Saudi Arabia. As the competition for the market share strengthens outside and inside Opec, the overall production may increase and result in market supply gluts.
So, we have every reason to suppose that 8-month price peaks at about 50.45 for Brent oil will hardly be updated in the current conditions.