Brent crude price dropped by around 0.77%, to $37.55 a barrel, on the first trading session of June.
The slump in the price comes after it posted its strongest monthly gains since 1999.
“The focus is very much on OPEC+,” OCBC economist, Howie Lee, told Reuters referring to OPEC and its allies including Russia. OPEC+ agreed in April to reduce output by an unprecedented 9.7 million barrels per day in May and June after the deadly COVID-19 pandemic weakened demand.
“We might see a cautious pullback in (crude) prices given that downstream prices haven’t caught up … but if OPEC+ does come up with a three-month extension, there’s a possibility that prices may hit the $40 level,” Howie Lee added.
Algeria, which presently holds the OPEC presidency, has started a move that an OPEC+ meeting scheduled for June 9-10 be brought forward to ease oil purchases for countries such as Saudi Arabia, Iraq, Kuwait, and Russia, who raised no objection.
“It’s been widely interpreted as likely to lead to an extension of the current production cuts,” CMC Markets’ chief market strategist, Michael McCarthy, said.
“Oil prices have come down slightly in our session but they’re still at elevated levels. I suspect that’s the key driver of prices on Friday night and should keep prices reasonably well supported today,” McCarthy added.