Crude oil prices edged down Tuesday, following a week of straight gains that brought the global oil benchmark above $50 a barrel for the first time in two months, amid growing optimism that the market is tightening.
According to Wall Street Journal report, Brent crude, the global oil benchmark, fell 0.61 percent to $52.40 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.38 percent at $49.98 a barrel.
Market analysts say the fall in price is due mainly to hedging on the outcome of the technical committee meeting of Organization of Petroleum Exporting Countries (OPEC) and its allies, which is due to be held in Abu Dhabi, United Arab Emirates, on 7-8 August 2017.
The meeting is expected to be co-chaired by Kuwait and Russia, in the presence of representatives from the Kingdom of Saudi Arabia, which is serving as President of OPEC in 2017.
The technical meeting, according to a statement on OPEC website is to better understand the difficulties and obstacles faced by some OPEC and non-OPEC participating countries and to assess how conformity levels can be improved with the goal of achieving a faster rebalanced global oil market, for the benefit of producers and consumers alike.
Oil had remained in a bear market for the most part of the year amid concern rising global output will offset curbs by members of the Organization of Petroleum Exporting Countries and its allies.
However, oil rose in the last week of July after leading OPEC producers Saudi Arabia and Nigeria pledged to cut exports to help speed the rebalancing of global supply and demand.
Khalid al-Falih, Saudi Energy Minister had pledged his country would limit crude oil exports at 6.6 million barrels per day (bpd) in August, almost one million bpd below levels a year ago, while Nigeria, which has been exempt in recent production caps to help her and Libya recover from years of unrest, voluntarily agreed to limit its production to 1.8 million barrels a day.
The announcement led to a rally which took oil price to a high of $53 a barrel Monday
At 1.8 million cap Nigeria will have no problem holding its production lead as it is currently producing below 1.6 mbpd, 600,000 bpd below its 2.2 mbpd budget benchmark.
But the cap will help the supply side of the global markets and boost prices, analysts following the developments said.
By Aderemi Alex Ojekunle