Federal government expects oil prices to fall

Adjust Comment Print

Oil fell on Tuesday, its first decline in five days, pressured by a firmer USA dollar and expectations that upcoming weekly data will show an increase in US crude inventories.

Global benchmark Brent was up 7 cents, or 0.1 percent, at $63.90 a barrel, after settled down 1.4 percent on Thursday, also a two-week low.

"Looking ahead, crude oil futures prices continue to suggest that the benchmark WTI oil price will ease from current levels back to the US$50 range over the forecast horizon. It is more about the broader trade environment", said Harry Tchilinguirian, senior oil analyst at BNP Paribas, adding that Trump's latest decision has the potential to damage relationships with the US's trading partners or even spark a trade war that could impact oil markets.

In its supporting budget plan documents, the federal government predicted a drop in oil prices.

The Organization of the Petroleum Exporting Countries (OPEC) will hold a dinner on Monday in Houston with United States shale firms, the latest sign of the producer group widening talks about how best to tame a global oil glut.

US crude inventories have fallen more than 100 million barrels in 12 months to their lowest in three years.

USA crude output hit an all-time high of 10.057 million barrels per day (bpd) in November before falling slightly in December, the government said, but weekly data showed another record and further gains are expected. USA crude oil production increased steadily through 2017, reaching its highest level in more than three decades.

An oil pump is seen operating in the Permian Basin near Midland, Texas, U.S., May 3, 2017. U.S. crude futures dropped 11 cents, to trade at 60.88 dollars a barrel. The dollar index hit a six-week high on Thursday.

Opec officials will meet USA shale executives at a U.S. energy conference on Monday, underlining the influence of American output on global prices.

"Despite the expanding output curbs by OPEC and non-OPEC members such as Russian Federation, the market has been focusing more on rising US output since around late January", said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo.