Oil ministers from the Organization of the Petroleum Exporting Countries (OPEC) will meet at their headquarters in Vienna on June 5. This will be their second meeting since oil prices began to plunge in June 2014. However, like November’s meeting, a decision by OPEC to maintain its current crude output is expected. Therefore, observers are likely to focus on clues which may signal the organisation's next moves in the oil market.
OPEC members hold a meeting every six months to discuss their current agenda. During their last meeting in November, the Saudi Arabian led group decided to hold its target at 30 million barrels a day in order to boost falling oil prices, while curbing oil output of other high cost oil producers such as shale oil drillers in the US.
It is anticipated that oil output by OPEC, which pumps out 40 percent of the world’s crude, has surpassed a 30 million barrels a day target, hitting a two and a half year high of 31.22 million barrels per day in May.
Although it currently looks like OPEC has won the tug of war battle in the oil market, as US production and growth began to contract while prices continue to rise, the global oil glut continues to become a major problem for the global economy.
Oil has risen to $65 a barrel from a low close of $45 in January. In response to the recovery of oil prices, some shale producers state that new drilling rigs will be installed.
“Since crude oil is a very cyclical commodity and demand and supply are inelastic in the short run, OPEC’s formalised policy shift will mean much more volatile oil prices going forward, with a range of possibly $80 a barrel,” reported analysts at Bank of America Merrill Lynch.
OPEC predictions and a rising dollar pushed oil prices lower on Monday.
Crude oil fell to 75 cents at $59.55 a barrel. Similarly, brent crude fell $1.00 a barrel to a low of $64.56 before recovering a little to around $64.65.