Crude oil prices drop almost 1% as the concerns of riots in the United States’s major cities looms over the weekend, even as the OPEC+ meeting agreement to cut productions has advanced. Riots break in U.S. major cities on Saturday night after began as a peaceful demonstration over the death of George Floyd, an African-American died as white Minneapolis officer knelt on his neck for minutes. The case has become a wave of outrage for the United States citizen after years of feeling politically and racially divided.
Major cities have responded to the protest and riot waves with curfews and other measures, retailers in the cities also beginning to close the operations after a few riots lead to the act of looting over this weekend.
In the futures market, West Texas Intermediate crude futures CLc1 for July delivery seen at $35.17/barrel, down $0.32 by 01:23 GMT while Brent crude LCOc1 fell $0.34/barrel to $37.50/barrel in the first day of trading in August contract. These downturns come after Brent and WTI prices strengthen during May, despite the records monthly gains in years. In the meantime, data from Baker Hughes Co shows supply in North America is also lowering after the U.S. and Canada oil rigs counts met record low in the week to 29 May.
OPEC+ made an agreement in April to reduce output by 9.7 million barrels per day in May and June after the global pandemic devastated demand. OCBC’s economist Howie Lee said that the pullback in crude prices will be seen since the downstream prices have not caught up, but prices may hit $40/barrel level if the OPEC+ agreement extended for around 3 months.
Saudi Arabia is proposing the idea to extend cuts until the end of the year, but this suggestion still has to win support from Russia. The tension between the United States and China also concerns the global market over financial uncertainties from the pandemic and U.S. riots.
The OPEC presidency holds by Algeria suggesting the OPEC+ meeting on June 9-10 includes facilitating oil sales for countries specifically Iraq, Kuwait and Saudi Arabia. Russia has expressed no objection if the OPEC+ meeting push forward to June 4.
