Oil prices slump as Saudi Arabia and Russian Federation consider output boost


USA crude futures dropped to six-week low of $65.80 per barrel, shedding 3.1 percent and is on course to post its fifth day of decline. Prices on Monday lost $1.14 to $75.30.

Over the past month to 24 May, investors in energy sector ETFs have been rewarded for their patience, after months of underperformance, as soaring oil prices finally raised returns for the year to date to 7.4%.

Oil will not trade in the USA on Monday in observance of Memorial Day (http://www.marketwatch.com/story/which-markets-are-closed-on-memorial-day-2018-05-25). That will happen, but gasoline prices react much more slowly to falling crude prices than to rising crude prices so don't expect a big drop and certainly don't expect it right away.

The CEO of Russia's top oil producer Rosneft, Igor Sechin, warned that oil prices could hit new records in the near future due to the sanctions that the USA is implementing against some hydrocarbons producing countries. Such a stance appeared after oil reached $80 per barrel and demand outlook appeared to be strong. The global benchmark crude traded at a US$8.92 premium to WTI for the same month, on course for the widest close since March 2015.

In China, Shanghai crude oil futures ISCc1 tumbled by 3.8 per cent to 462.3 yuan ($72.34) per barrel. As a result, EURUSD fell below 1.1650 on Friday. He was echoing concerns voiced a week earlier by the International Energy Agency (IEA), which advises major oil-consuming nations. Without compensating supply from other members, this number looks likely to expand as the USA reimposes sanctions on Iran and the collapse of Venezuela's oil industry worsens.

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The country's light oil price was reported $66.91 on average since the beginning of 2018 until May 18. Anything above that level "can lead to certain problems for consumers, which also isn't good for producers", he said.

Meanwhile, record crude oil volumes from the United States would head to Asia in coming months, nibbling away the market share of OPEC and Russian Federation.

USA energy companies added 15 rigs looking for new oil in the week ending May 25, bringing the rig count to 859, its highest since 2015, in a strong indication that American crude production will continue to rise.

United States crude production has increased by about 25% since mid-2016 as producers look to capitalize on rising prices.