Economy

Low gas prices will mean more road trips this summer

Low gas prices will mean more road trips this summer”

The latest OPEC meeting was uncharacteristically tranquil, with little of the eleventh hour infighting and arm-twisting that has been so prevalent in previous meetings.

The extension, which also includes Russian Federation and other non-OPEC countries, was widely expected and had already been factored into oil prices.

Adding cautiously that the market welcomed the advent of shale oil he said, "the only problem we had was the pace of the increase". For OPEC, the price reaction is surely frustrating.

Here is an account of what the deal entails for oil producing and consuming nations. The deal involving Organization of the Petroleum Exporting Countries members and Russian Federation was widely expected by analysts, but disappointed investors who were hoping for a longer extension. In other regions oil traders only get official figures on a monthly basis, or not at all in the case of stockpiles in big consumers such as China and India. "What else can you give me?"

On Wednesday a joint committee of OPEC and non-OPEC nations recommended such a nine-month rollover.

The "declaration of cooperation", as it has become known, will be extended for a period of nine months to help stablise the oil market.

OPEC cares more about the global inventory picture. Amrita Sen, the top oil analyst at Energy Aspects, agreed.

The American Automobile Association projected 34.6 million people will drive 50 miles (80 km) or more from home during the end-of-month holiday period, the most since 37.3 million in 2005 and a 2.4 increase from a year ago.

Indeed, there is still more work to do.

"With this kind of momentum and nearly two weeks to go until the vote, not only is this not going to be the breeze that May anticipated when she called the snap election last month, it could yet turn into a humiliating defeat for the Conservative leader and her party", said Craig Erlam, senior market analyst at OANDA.

Oil stockpiles in developed countries in the OECD jumped by 24 million barrels during the first quarter to a new record of 1.2 billion, according to the International Energy Agency.

It was meant to demonstrate a commitment to do whatever is necessary to bring inventories down to their five-year average level, Bloomberg Gadfly columnist Julian Lee said. Oil prices have rallied over the last few weeks, but experts doubt the deal will do much to boost prices. OPEC could decide to return production to pre-cut levels as the cartel may not want to lose its market share and look to raise revenues through volumetric growth.

OPEC is a bit more bullish, expecting this balance to be reached by the end of this year. "Having high conviction in forecasts is a challenge given Zodiac's enduring volatility", they said in a note.

After sparing its prized United States market from oil-output cuts, Saudi Arabia plans to "markedly" reduce exports to its political ally in the coming weeks in an effort to reduce swollen and highly visible crude inventories in the world's biggest consumer.



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