Oil prices rose on Tuesday amid a fall in the dollar and positive comments by Saudi Arabia’s oil minister, ahead of an important meeting of the Organization of the Petroleum Exporting Countries (OPEC) on Friday.
The weaker dollar against a basket of currencies benefited dollar-priced commodities like oil, with these becoming relatively cheaper for holders of other currencies as the dollar depreciates.
Brent crude oil for July delivery increased by 42 cents at $60.62 a barrel while US.crude rose by 21 cents to $65 a barrel.
Ministers from OPEC, responsible for more than a third of the world's oil output, will meet in Vienna on Friday June 5 to discuss production policy for the next six months.
Market observers believe that OPEC will hold its oil production at its target of 30 million barrels a day, a strategy the 12 member cartel uses in order to secure its position in the oil market.
In preparation for the meeting, Ali al-Naimi - Saudi Arabia’s oil minister - arrived in Vienna on Monday. Speaking upon arrival, he said that strategy is progressing as planned.
Naimi, a key figure in the global oil market, stated that oil prices have declined by close to $15 since the last OPEC meeting in November, while Saudi Arabia’s own oil output has risen by 0.5 million barrels a day. Conversely, US shale growth has contracted to a monthly low of 86,000 barrels a day and global oil demand has surged.
He also said that oil demand is slowly gaining pace while supply is losing steam.
Although a change in OPEC’s official target is seen as rather unlikely, some analysts believe a change in the production target may occur as OPEC surpassed its oil production target in May, hitting 31.22 million barrels per day.
Contradicting the views of OPEC members may also hinder a change as Saudi Arabia, key driver of OPEC, believes high output is good for the market share while Venezuela and Iran have favoured cuts in defence of higher prices.