Oil rose as Saudi Arabia offered reassurance that Opec will keep global crude markets in balance after concerns over the US-China trade dispute triggered the steepest monthly slump this year.
Futures gained 1.7 per cent in New York after another plunge on Friday concluded May’s 16 per cent sell-off, which was driven by worries that the trade war will crimp fuel demand. Saudi Energy Minister Khalid Al Falih said that recent volatility is “unwarranted” and reiterated his confidence that Opec and its allies will keep taking action to stabilise the market beyond June.
“I would like to reiterate my confidence, based on my discussions with several key producers, and on our track record, that we will do what is needed to sustain market stability beyond June,” Mr Al Falih said in an interview with state-run Saudi Press Agency. “We have previously stated our commitment to do whatever it takes to stabilise markets and we have delivered on those promises. And I am making that commitment again.”
The Saudi output target under the Opec-led pact is 10.3 million bpd.
The trade tensions mean oil has moved close to the edge of a bear market, having fallen about 18 per cent from a high in late April. There could be greater clarity this week on whether Russia will keep cooperating with Saudi Arabia on production cuts as ministers from the countries meet in St. Petersburg.
West Texas Intermediate crude for July rose 93 cents to $54.43 a barrel on the New York Mercantile Exchange at 8.21am in local time, after falling as much as $1.39 earlier. The contract is now down about 18 per cent from its closing high on April 23, Bloomberg reported.
Brent for August settlement advanced 66 cents to $62.65 a barrel on London’s ICE Futures Europe exchange. The July contract closed 3.6 per cent lower at $64.49 before expiring on Friday. The global benchmark crude was trading at a premium of $8.08 to WTI.
A planned June 4 strike by Norwegian workers could also lead to tighter global supply and buttress prices, potentially cutting Norway's oil and gas output by about 440,000 barrels of oil equivalents per day if mediation efforts fail, Reuters reported.
There could be a recession in nine months if the US imposes 25 per cent tariffs on an additional $300 billion of Chinese exports and Beijing retaliates, according to Morgan Stanley. Investors may still be underestimating the risks to the global economy from the trade war, Chetan Ahya, the bank's chief economist, wrote in a note released Sunday.
Updated: June 3, 2019 05:42 PM