$66 OIL, OPEC UNCHANGING, OBAMA TO VISIT SAUDIS
May 29th, 09
Oil prices closed the month at $66 a barrel, having rallied for weeks to reach the current six-month high. OPEC met on May 28th, and as expected, decided to leave production unchanged.
The secretary general of OPEC, Abdalla El-Badri said that the current rally in oil was not driven by demand, but rather by sentiment, and that although crude stockpiles around the world remain very high, he predicted prices to reach $70 to $80 a barrel by the end of the year. The Organization of the Petroleum Exporting Countries collectively supply forty percent of the world’s crude oil and had previously agreed to production cuts of 4.2 million barrels per day (bpd) since September of last year.
President Obama is set to visit Saudi Arabia next week and stated he would talk about oil prices when he meets Saudi King Abdullah, amongst a range of other issues. “I’ll be very honest with King Abdullah, with whom I've developed a good relationship, indicating to him that we're not going to be eliminating our need for oil imports in the immediate future – that’s not our goal,” the President said. When asked about his general message for the visit he replied, “I don't think it's in Saudi Arabia's interests to have a situation in which our economy is dependent - or disrupted constantly - by huge spikes in energy prices”.
Much of the recent price rise of crude has been pinpointed as signals that the global economy is recovering, and even some speculation. Based on U.S. Commodity Future Trading Commission information, hedge fund managers and other large speculators have increased their net-long position in NYMEX crude futures. Energy analysts noted that supply still exceeds demand as global oil inventories reach record highs, but there is an increasing optimism towards the global economic outlook. OPEC stated that the demand would have to recover before considering production quotas once more. The secretary general also said that no OPEC members had reduced production, and that all countries besides Mexico had actually increased production.
El-Badri also noted, “Speculation is coming back, not only in oil but in all commodities. We see that they are coming back slowly. We don’t want to see them again but we can’t eliminate them”.
The Energy Information Administration reported that U.S. oil supplies dropped by 5.4 million barrels last week, while supplies have fallen for the third week in a row. Oil futures made the biggest monthly gain since 1999, closing at $66.31.