- Last week, the oil prices rose on Friday and were on track for monthly gains, benefiting from news that U.S. oil output cuts in May were the largest on record.
- U.S. crude was up 35 cents, or 0.9%, at $40.27 after dropping 3.3% in the previous session, also off lows not seen since July 10.
- Brent crude settled up 37 cents, or 0.9%, at $43.31 a barrel.
- Brent is heading for a fourth month of gains, while U.S. crude posts a third month. Both rise from a troubled market since April due to lockdown.
According to a Reuters report written by Jessica Resnick-Ault, the U.S. cuts the production most on record and weaker dollar boosts commodity prices. It also adds that the weaker refining margins around the world, lower Chinese oil demand and high crude inventories are putting further pressure on oil prices.
EIA report
According to the U.S. Energy Information Administration monthly report, the U.S. crude oil production plummeted in May, falling a record 2 million barrels per day to 10 million bpd.
“After a bad day for big oil with terrible earnings, we’re starting to see the impact in barrels,” said Phil Flynn, an analyst at Price Futures in Chicago. “This suggests that we will see a tighter market in the future, and if the economy turns around we will have trouble meeting demand.”
Dollar falls dramatically
Investors typically use dollar-denominated commodities as safe havens when the currency weakens.
The dollar extended its dramatic fall on Friday and was on course for its biggest monthly drop in a decade.
This was an outcome of the news that U.S. gross domestic product collapsed at a 32.9% annualized rate – the steepest decline in output since records began in 1947.
“Global stimulus and a weak dollar will continue to support oil prices, as historically oil is seen as a hedge against inflation,” said Keshav Lohiya, chief executive officer of consultancy Oilytics.
Traders to monitor oil output
Bjornar Tonhaugen, head of oil markets at Oslo-based Rystad Energy, mentioned that traders will next week closely monitor oil output increases by the Organization of the Petroleum Exporting Countries (OPEC) and its allies.
OPEC+ plans to hike the production adding about 1.5 million barrels per day to global supply, after slashing output due to the coronavirus pandemic.
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Source: Reuters
