Oil Mixed As Traders Wait For Clarity On Production Cuts

Oil Video 01.06.20.

OPEC+ Is Set To Move Its Meeting To June 4

According to a Reuters report, Russia agreed to move the key OPEC+ meeting to June 4 in order to discuss the extension of existing oil production cuts.

The original production cut deal implied production cuts of 9.7 million barrels per day (bpd) in May – June, followed by production cuts of 7.7 million bpd from July until the end of the year.

In recent weeks, oil traders were trying to guess whether OPEC+ was ready to provide additional support to the market by keeping existing production cuts for more months.

Some reports indicated that Saudi Arabia wanted to keep existing oil production cuts until the end of the year while Russia was discussing the topic with its oil companies.

Other reports presented a different picture and argued that Russia was set to increase its oil production in July.

The most recent rumors on this front indicate that Russia and Saudi Arabia are discussing the extension of current oil production cuts for 1 – 2 months.

This makes sense since OPEC+ members need more time to evaluate the longer-term impact of coronavirus pandemic on the oil demand as the world economy starts to recover from the acute phase of the crisis.

Fears Of Another Round Of U.S. – China Trade War Put Pressure On Oil

Global markets were relieved when the U.S. President Donald Trump did not announce new tariffs on China during the news conference on Friday.

However, his decision to start eliminating the special conditions for Hong Kong has already provoked counter-measures from China.

According to reports, China has directed its state-owned companies to stop buying soybeans and pork from the U.S.

Additional purchases of U.S. farm products were an important part of the trade deal between U.S. and China so the move raises questions about the viability of the whole deal.

An escalation of the trade war between the two biggest economies would be bearish for the world markets so oil traders should watch the story closely.

At the same time, the upside trend in oil is supported by production cuts and natural production shutdowns caused by low prices so the U.S. – China tensions will likely have to increase further in order to push oil prices down.

For a look at all of today’s economic events, check out our economic calendar.