Oil steady on US-North Korea optimism, but price falls look likely
Singapore — Oil markets were stable on Tuesday amid cautious optimism over the outcome of a summit between US President Donald Trump and North Korean leader Kim Jong-un in Singapore.
Movements in crude markets were also limited ahead of a meeting between the Organisation of the Petroleum Exporting Countries (Opec) and some of its allies on June 22 that may determine the crude production policy of several major producers.
Brent crude futures were trading at $76.45 a barrel at 3.55am GMT, little changed from their last close.
US West Texas Intermediate (WTI) crude futures were at $66.16 a barrel, up 6c from their last settlement.
Crude has been supported by healthy demand and voluntary production cuts led by Opec, but analysts said oil markets were also being driven by public policy events and statements.
Trump and Kim on Tuesday met for a one-day summit in Singapore with the goal to narrow differences over how to end a nuclear standoff on the Korean peninsula, with Trump stating he had forged a "good relationship" with the North Korean leader.
"And today marks the potentially momentous meeting between Donald Trump and North Korean leader Kim Jong-un in Singapore," said Shannon Rivkin, investment director at Australia’s Rivkin Securities.
Global markets edged up as the highly anticipated summit got under way amid expressions of goodwill.
"Any positive outcome could be good news for markets," Rivkin said.
Oil market fundamentals, however, point to lower prices, with output from the three biggest producers, Russia, the US and Saudi Arabia, on the rise.
Russian production has reportedly climbed from below 11-million barrels a day to 11.1-million barrels a day in early June.
In the US, output has risen by almost a third in the past two years, to a record of 10.8-million barrels a day.
"The deluge of US crude production continues to hold the top-side in check," said Stephen Innes, head of trading at futures brokerage Oanda.
Now, top exporter Saudi Arabia — which has so far led Opec’s efforts to withhold supplies — is also showing signs of raising production.
Saudi Arabia has told Opec that it increased oil output to a little more than 10-million barrels a day in May, up from 9.9-million barrels a day in April.
"This fits with the theory that the Saudis and Russians are subtly moving toward a change to the agreement at this month’s meeting," said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
Opec and some non-Opec producers including Russia started withholding output in 2017 to end a global supply overhang and prop up prices.
Opec and its partners are due to meet at its headquarters in Vienna, Austria, to discuss policy.
"Expect more of the same whippy markets driven by rumours and innuendo ahead of the June 22 Vienna Opec meeting," Innes said.