Oil quotes are correcting after a significant rise on Friday. Brent crude at 11:00 EET was selling at $64.75, whilst WTI with July delivery was trading at $59.53 per barrel. At last week’s close, North Sea oil on July contracts was trading at $65.47 a barrel and the price of light crude with delivery in July at the close of the New York session was $60.24 per barrel.
On Friday the price of oil grew due to a reduction in US drilling rigs. According to data from Baker Hughes, the total number of rigs (gas and oil) in the country fell by 10, to 875 over the week ending 29th May. This is 991 less than a year ago. The number of oil drilling rigs in the US fell by 13, to 646, against a fall by one the week earlier.
Nevertheless the supply of oil on the market is increasing, thus prohibiting a continued rise in prices. In May OPEC significantly exceeded its extraction quota, reaching 31,579,000 barrels a day. As such, the cartel has exceeded the quota for the last 12 months in a row. Furthermore, according to data from OPEC representatives who would like to remain anonymous, the organization believes that in the second half of the year, the demand for oil will rise. This means that the cartel is unlikely to drop the quota.
We reckon that oil prices before the OPEC meeting will fluctuate erratically, with higher volatility towards the end of the week. Brent will trade in the corridor of $63-66.5 a barrel this week, whilst WTI won’t leave the $61 per barrel marker.