During last week’s OPEC + meeting the group agreed to keep production cuts of 9.7 million barrels per day until the end of July. This effort has helped bolster oil prices to levels of almost double the values in April. The prior OPEC + meeting brought forth the creation of a new advisory group, the Joint Ministerial Monitoring Committee. According to Reuters, “To step up consultations on the effectiveness of the agreement, OPEC+ also agreed that a panel called the Joint Ministerial Monitoring Committee or JMMC, will meet monthly until the end of 2020. Its first such meeting is on Thursday next week… “It’s an advisory committee that can make recommendations,” one of the OPEC+ sources said of the JMMC’s role, declining to be identified by name.” The member nations that compose the JMMC are Algeria, Kuwait, Venezuela, Nigeria, Iraq, United Arab Emirates and Saudi Arabia, plus non-OPEC countries Russia and Kazakhstan.
As we near the end of May, we will put behind us one of the most bullish rallies for the WTI crude oil contract in history with crude jumping almost 75% this month alone. Of course, with WTI prices currently trading at $33.33/barrel, that’s not saying much, as it is widely perceived the breakeven price for domestic crude producers is $32/barrel. The question is: will this rally persist? Let’s review some components to watch out for this summer.
Nearly one month ago, U.S. oil futures hit a historic moment, dropping below zero for the first time. At that time traders were scrambling to pay buyers to take off crude futures, while month end rolls were looming. This morning, U.S. oil futures climbed roughly 9% to $32 a barrel, a price that would allow some of the lowest cost oil wells in the United States to break even. Oil prices are roughly half of what they were to start the year, but the slight uptick in driving across America, has helped rally the oil prices. Currently, 87E10 gasoline pump prices are at an average of $1.88 a gallon in the U.S., about $0.98 less than last year.
Prices in the oil sector are under pressure today prompted by a gigantic build in distillate inventories last week as reported in today’s Department of Energy (DOE) petroleum report.