Crude Oil Prices Kick Off The Week In The Red

Monday’s trading session saw crude oil futures finish in the red, as a result of speculation that the Organization of Petroleum Exporting Countries (OPEC) would choose to maintain its production rate, when member countries’ ministers meet on June 5. The strength exhibited by the US dollar during yesterday’s trade also took its toll on the commodity futures.

US crude price benchmark, West Texas Intermediate (WTI) Crude Oil front month futures, ended the trading session down 0.17% on Monday, at $60.2 per barrel. The futures contract averaged a price of $59.87 per barrel during the session, after having started the day’s trade at $60.3 per barrel.

Brent Crude Oil front month futures (the benchmark for global crude oil prices), traded down 1.04% on Monday, settling the day at $64.88 per barrel. Brent had an opening price of $65.56 per barrel, but traded at an average price of $64.98 per barrel during the day. Consequently, the United States Brent Oil Fund, LP (NYSEARCA:BNO) was down 0.64% at the closing bell on Monday.

The ministers from the 12 OPEC-member nations last met in November 2014, where the organization decided to maintain its crude oil production at 30 million barrels per day, while the global market was oversupplied by an estimated 2 million barrels per day. The decision was said to be led by Saudi Arabia, the largest crude oil producing member of the 12 member nations, in an attempt to drive the prices down and limit supply from the US.

Recent signs from OPEC and Saudi Arabia have suggested that the organization would not decide differently, when it meets this Friday. Analysts polled by Bloomberg have called for OPEC to keep its production rate unchanged at 30 million barrels per day.

Included in the signs pointing towards OPEC maintaining its production rate, is the fact that the supplier of one-third of the world’s crude oil supply exceeded its self-imposed collective quota for the 12th month in May. According to a Bloomberg report, the group pumped out more than 31 million barrels per day during May.

Saudi Arabia’s energy minister, Ali Al-Naimi, said on Monday that he sees the demand for crude oil to pick up in the second half of 2015. Mr. Al-Naimi said that the country’s strategy to keep its production rate unchanged to maintain its market share has worked, saying that to keep the prices depressed and weed out smaller producers have allowed them to retain their market share.

Saudi Arabia has been increasing its crude oil output, since OPEC met last time. According to Bloomberg estimates, the country pumped out 10.25 million barrels per day of crude oil during May, unchanged from the earlier month. The production rate last month, and the month before was the highest recorded by Bloomberg, since 1989.

With the recent comments from Mr. Al-Naimi, some analysts have started to believe that rather than cutting the commodity’s collective output, OPEC might just increase it. In a report published on Monday, Morgan Stanley analyst, Adam Longson, warned investors about OPEC deciding to start pumping more crude oil following the June 5 meeting.

The strength in the US dollar during trading yesterday pressured the commodities during Monday’s trade. The greenback gained 0.53%, against a basket of currencies on Monday gaining 0.59% against the euro. A stronger US dollar resulted in foreign investors finding the dollar-denominated commodity futures less affordable. The strength in the greenback was largely driven by the favorable manufacturing data released for the US during trading yesterday.

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