10th June, 2014
Oil prices rose further on Tuesday, the eve of OPEC’s meeting to decide on crude output levels, while energy market investors kept a close watch over vital Ukraine-Russia gas talks.
Brent North Sea crude for delivery in July climbed 18 cents to stand at $110.17 a barrel in London afternoon trading, compared with Monday’s closing value.
US benchmark West Texas Intermediate (WTI) for July gained 36 cents to $104.77 a barrel.
Prices had rallied on Monday as investors cheered robust economic data from the US, China and Japan. A breakdown of initial Ukraine-Russia talks to avert a gas cut-off also boosted prices, traders said.
Brent, a benchmark for the pricing of Middle Eastern crude, “has been consolidating within the recent range of $109-110 per barrel … as investors remain cautious ahead of the crucial OPEC meeting in Vienna” on Wednesday, noted Sucden brokers analyst Myrto Sokou.
“Market participants will watch carefully for any signs of clarification … from major oil supplier countries.”
OPEC is widely expected to stick by its oil output ceiling on Wednesday, as supply tensions linked to global crises help to keep crude prices high, benefiting producers.
The Organization for Petroleum Exporting Countries, whose dozen member nations together supply about one third of the world’s crude, is widely expected by experts to keep its daily output ceiling at 30 million barrels of oil.
While OPEC is satisfied with current price levels at about $100 a barrel, the cartel is in fact pumping below its collective target owing to abundant supplies in top crude consumer the United States.
Offsetting this are worries of potential supply strains as Ukraine risks sliding into all-out civil war.
Investors are concerned that a full-blown conflict in Ukraine would disrupt supplies and send energy prices soaring. Russia accounts for nearly 40 percent of EU gas imports, with half of that transiting through pipelines in Ukraine.
Ukraine’s week of tough negotiations with Russia, aimed at ending a separatist insurgency and averting a gas cut-off, got off to a rocky start as a round of gas talks broke up early Tuesday without a deal.
The meetings in Brussels and Kiev are the first challenges for new Ukrainian President Petro Poroshenko, who has vowed dialogue with Moscow to try to prevent the bitterly divided former Soviet state from splitting.
After seven hours, a marathon round of EU-brokered gas talks in Brussels broke up, but was set to resume later Tuesday or Wednesday.
“The talks represent a potential source of friction and with concerns of armed conflict, it is a possibility for an upside bias on crude oil,” Michael McCarthy, chief market strategist at CMC Markets in Sydney, told AFP.
Ukraine has refused to pay the bills in protest at Russia’s decision to nearly double rates in the wake of the February ouster of Kiev’s Kremlin-backed president.