OPEC Members About To Flood Oil Markets

Crude oil added 29 cents in the Asian session combating the strong US dollar and weak Chinese inflation data. There is really no explanation for the continued gains as WTI reached 44.16. Brent oil is trading in the green at 48.10. Just yesterday the OECD warned on global growth which should have sparked a sell off in energy products. China’s economic slowdown is set to drag the global economy to the verge of recession, according to the latest forecasts from the Organization for Economic Co-operation and Development (OECD). The Paris-based multilateral organization said the world economy will expand by just 2.9 per cent this year, slipping below the 3 per cent level often used to classify a global “growth recession”.

The OECD’s latest forecast is lower than the already gloomy 3.1 per cent estimate from the International Monetary Fund. And it would represent the weakest level of global output expansion since 2009, when the world was in the midst of the biggest financial crisis since the 1930s.

News from the Gulf state meeting this week surprised investors as members seem to differ on how to proceed forward. The UAE is going ahead with its projects to increase crude production and is committed to supplying any shortage in the global oil market, the Energy Minister Suhail Al Mazroui said as Abu Dhabi International Petroleum Exhibition and Conference is set to begin on Monday.

“The United Arab Emirates is committed to increase its production capacity of crude oil to ensure the stability of oil markets. It also works to increase the refining capacity of crude oil within its efforts to meet the growing oil products demand,” he said.

The Minister said that the UAE as a member of the Organization of Petroleum Exporting Countries is committed to bridging the shortfall in supplies to the world market in the event of any disruption in the production of any member State.

Iraq is taking OPEC’s strategy to defend its share of the global oil market to a new level.

The nation plans to boost crude exports by about 26 percent to a record 3.75 million barrels a day next month, according to shipping programs, signaling an escalation of OPEC strategy to undercut U.S. shale drillers in the current market rout. The additional Iraqi oil is equal to about 800,000 barrels a day, or more than comes from OPEC member Qatar. The rest of the Organization of Petroleum Exporting Countries is expected to rubber stamp its policy to maintain output levels at a meeting on June 5.

OPEC’s not the only balance of the market. The United States is back in the role of swing producer, a role it hasn’t exerted in six decades.

Fluctuating oil prices are nothing new, but this time the U.S. has found itself roaring back into the industry with the mass production of shale oil and reduced dependence on imports.

U.S. shale, a weakening economy in China and other factors have pushed prices down. Yesterday U.S. crude fell 42 cents, or 0.9 percent, to 43.87 a barrel on the New York Mercantile Exchange. Brent crude, a benchmark for international oils, declined 23 cents to 47.19 a barrel in London.