Oil prices tanked last week and in May – part of the fall was due to Donald Trump’s cack-handed tariffs on Chinese imports in his May 5 tweet, a little was due to his tariff threat against Mexico and some was due to the growing fear the US, Chinese, and other economies are heading into a slowdown.
So instead of upward pressure on oil supplies and prices, it’s downward and at a rapid rate.
The slide – which Trump will like, though for the wrong reasons as Americans go on holidays and use cheaper petrol – will mean OPEC and Russia will keep their 1.2 million barrels a day cap on production at its meeting this month. That’s despite the growing belief that Russia wants to weaken or drop the cap to bolster its exports.
But the fall of up to 16% in oil futures in May will change that view, as well as start people wondering if there’s something more substantial happening than the slide we saw late last year which subsequently reversed.
The fall in prices in May for oil and petrol will ease the already weak upward pressure on inflation that many central banks were starting to factor into second-half forecasts, as will the slide in other commodity prices, especially metals.
On Friday, West Texas Intermediate crude for July delivery lost $US3.09, or 5.5% in New York, to settle at $US53.50 a barre — the lowest finish for a front-month contract since February. 12.
Front-month contract prices (or current) lost nearly 8.8% for the week and fell 16.3% for May – the worst monthly loss since November when they skidded 22%.
In Europe, it was a similar story with Brent crude futures.
On its expiration day, the July contract for Brent crude fell $US2.38, or 3.6%, to end at $US64.49 a barrel — the lowest settlement since February 13.
Front-month contract prices lost 11.4% month to date and 6.1% lower for the week. August Brent crude the new futures front month, settled at $US61.99, down $US3.34, or 5.1% on the day.
The Energy Information Administration on Thursday reported that US crude stocks eased by a much less-than-expected 300,000 barrels for the week ended May 24 while domestic production rose by around 100,000 barrels to 12.3 million barrels a day. That was the level hit in early May.
At the same time, there was a small rise in the number of active rigs drilling for oil in the US. Baker Hughes reported a rise of 3 in the number of active US oil rigs to 800, the first rise in three weeks.
And Reuters reported that Saudi Arabia has raised production in May, but not by enough to compensate for lower Iranian exports after President Trump clamped down on shipments
The 14-member OPEC pumped 30.17 million barrels per day (bpd) in May, according to the Reuters survey, down 60,000 bpd from April and the lowest OPEC total since 2015, the Reuters survey showed.
And yet that has had little impact on global prices.
