Expect Choppy Oil Markets Ahead Of The OPEC Meeting

Oil prices extended losses on after JP Morgan cuts forecast

Oil prices extended losses on after JP Morgan cuts forecast

Oil prices fell on Friday as weakening demand in China and surging U.S. output weighed on markets despite supply woes in Venezuela and Iran on top of OPECs production cuts. For the week, US crude was set to fall 0.2 percent, while Brent was set to fall 0.6 percent.

On Friday, oil prices came under pressure after data suggested Chinese demand was waning and concerns lingered about growing USA output.

JP Morgan cut its 2018 crude forecast for WTI by $3 to $62.20 a barrel.

"Non-OPEC supply is expected to rise sharply in 2019 led by United States shale growth along with Russia, Brazil, Canada and Kazakhstan", U.S. bank JPMorgan said in its quarterly outlook published on Friday, adding that it was bearish for the oil price outlook going into the second half of the year.

The futures contracts dipped after the forecast was issued, and then pared losses.

Further weighing on prices has been rising U.S. output, which hit another record last week at 10.8 million bpd.

Russian production has reportedly climbed from below 11 million barrels per day (bpd) to 11.1 million bpd in early June.

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Saudi Arabia has told OPEC that it raised oil output to a little more than 10 million bpd in May, up from 9.9 million bpd in April.

World oil prices show mixed dynamics on Friday, as investors react to news about delays in deliveries from Venezuela and wait for statistics on drilling activity in the U.S.

Indeed, investment bank Jefferies reiterated that the market is tight and spare capacity could dwindle to 2 percent of demand in the second half of 2018, its lowest level since at least 1984 - but the warning went unnoticed, at least for the time being.

The increase in the Brent oil price followed reports late Tuesday that Venezuela state oil company PDVSA may have to declare force majeure-the legal clause that allows firms to walk away from contracts due to causes outside of their control-on some of their oil contracts.

OPEC member Venezuela, threatened with USA sanctions in the midst of an economic crisis, is almost a month behind delivering crude to customers from its main export terminals, according to shipping data.

Many market observers are anticipating a drop in crude prices ahead of the cartel's next meeting in Vienna on June 22.

Headlines on OPEC members' plans for the meeting later this month will lead to volatile market swings, said Tariq Zahir, managing member of Tyche Capital Advisors in NY. "I don't think that we are likely to get there based on fundamentals".

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