Reuters reported that Brent crude edged below USD 115 per barrel on expectations that OPEC’s oil output in May would come in higher than April, with investors also focused on demand from top consumer the United States as the summer driving season begins.
Brent fell 8 cents to USD 114.95 per barrel while US crude fell 8 cents to USD 100.52 at 0409 GMT. More oil from top exporter Saudi Arabia and fellow OPEC members Nigeria and Iraq should push the producer group’s total output higher and more than compensate for a further fall in Libyan supply in May.
The US driving season traditionally kicks off on the weekend of Memorial Day, a public holiday taking place. London traders were also out on Monday for a public holiday there, so trading would likely be thin.
As motorists drive out on vacation, US gasoline demand reaches its annual peak. With uncertainty over the strength of the recovery in the world’s largest economy and with high US gasoline prices a matter of concern for President Barack Obama, demand for the fuel will be closely watched.
Mr Jonathan Barratt MD of Commodity Broking Services in Sydney said that “There are expectations of prices picking up purely because of the drive time in the US. We feel that might actually support crude prices. Still, government data ahead of the driving season last week showed gasoline demand over the previous four weeks down 2% on the year.”
High energy costs have sparked global concern as a drag on economic growth. A slowdown in economic expansion would in turn slow the growth in demand for fuel.
In France, the Group of Eight world leaders agreed that the global economic recovery was becoming more self sustained although they said higher commodity prices were hampering further growth.
Fighting in Libya has almost shut down output in what used to be Africa’s third largest producer, but supply from all 12 members of OPEC is expected to average 28.90 million barrels per day this month to help cover the gap. This is up from a revised 28.79 million barrels per day in April.
