(06 JUNE 2017)DAILY MARKET BRIEF 2:Oil may hit $44 a barrel with prices under strong downside pressures

(06 JUNE 2017)DAILY MARKET BRIEF 2:Oil may hit $44 a barrel with prices under strong downside pressures

6 June 2017, 14:54
Jiming Huang
0
25

This last weekend was intense in the Middle East. Indeed, Saudi Arabia and other OPEC countries (Egypt, Bahrain and United Arab Emirates) have all cut diplomatic relations with Qatar due to the nature of its relation with terrorism.

The growing geopolitical uncertainties have as a result sent the oil prices lower. There is the growing fear that with this major political issue, Qatar may not comply with the extended production cut which OPEC agreed for nine more months.

A barrel of crude is now trading below $48 and has lost around 8% since May 25. We now monitor the risk of military escalations between the two major OPEC members which seems at the moment very unlikely but would put larger downwards pressures on oil.

Nonetheless, we believe for the time being this diplomatic incident is compromising the OPEC deal, despite Qatar being a very small oil producer and one of the smallest amongst OPEC.

At the same time, it is important to notice that US crude production has increased by 10% in the last year and this is adding up to put stronger downside pressures on oil. We target $44 a barrel within the next few weeks.

By Yann Quelenn

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