Oil dips in cautious trading ahead of OPEC meeting

 01 Jun 2016 - 10:07

Oil dips in cautious trading ahead of OPEC meeting
A general view of a crude oil importing port in Qingdao, Shandong province, in this November 9, 2008 file photo. Reuters/Stringer/Files

 

Singapore: Oil prices dipped in Asia Wednesday even as official China data showed factory activity expanded in May, as traders trod cautiously before an OPEC meeting in Vienna this week. 

Crude prices have rebounded from their January lows of under $30, and last week briefly pushed past $50 a barrel for the first time this year as the market gained support from production outages in Canada and Nigeria.

But prices have since retreated back below the key psychological level, and crude futures remain at less than half of their 2014 peaks of over $100 amid a stubborn global supply glut.

At about 0645 GMT, US benchmark West Texas Intermediate (WTI) for delivery in July was down 46 cents at $48.64 a barrel. Brent North Sea crude for August, a new contract, was down 52 cents at $49.37.

Official data from China Wednesday showed factory activity expanded for the third straight month in May but the change is "too marginal" to hint at a pick-up in crude demand in one of the world's largest energy consumers, said IG Markets analyst Bernard Aw.

The Purchasing Managers' Index, which tracks activities in the country's factories and workshops, showed a reading of 50.1. Any reading above 50 signals expanding activity. 

Aw said traders are also reluctant to make any big moves ahead of the Organization of the Petroleum Exporting Countries (OPEC) meeting in Vienna.

"(Traders) are just trying not to commit to any fresh positions because of the risk involved," he told AFP.

The group convenes Thursday in the Austrian capital for its first meeting with Saudi Arabia's new oil minister -- a close ally of Prince Mohammed bin Salman, who has been outspoken about not reducing oil production.

OPEC, which pumps around a third of the world's oil or some 30 million barrels every day, has historically responded to a fall in prices by cutting production.

But in the current cycle producers led by kingpin Saudi Arabia have changed strategy, maintaining output even with lower prices in order to pressure US shale producers.

The recent recovery in prices has also eased pressure on the group to turn down the taps at this week's gathering, analysts say.

Aw said there was little incentive to trade because of low expectations from the meeting.

Major OPEC player Iran has also indicated it is unwilling to cap production after the lifting of nuclear-linked Western sanctions in January.

AFP