Oil falls as OPEC
expected to shun any output curbs
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[June 01, 2016]
By Simon Falush
LONDON (Reuters) - Oil prices fell on
Wednesday on expectations of OPEC inaction on output as its focus
stays on retaining market share, while concerns about China's
economy weighed on the demand outlook.
Brent crude was at $49.19 per barrel at 1116 GMT (7.16 a.m. ET),
down 70 cents. It earlier fell more than $1 to the day's low of
$48.86. U.S. crude futures were down 74 cents at $48.36 a barrel.
Gulf OPEC members including Saudi Arabia are looking to revive the
idea of coordinated oil-output action by major producers when the
group meets on Thursday, a senior OPEC source said.
Oil trimmed some earlier losses after the source spoke.
Iran signaled it was not ready for any such deal and analysts said
it was more likely that OPEC members would continue to focus on
defending market share instead of propping up prices by curbing
"The OPEC meeting in Vienna on Thursday is unlikely to see a change
in the policy of maintaining market share," said Oxford Economics
lead economist Patrick Dennis.
"Saudi Arabia can claim its policy has been successful with oil
prices recovering at the same time as non-OPEC oil production has
fallen back, leading to a more rapid global market rebalancing than
Iran's representative to the OPEC said Tehran would not commit to
any oil output freeze and that any discussion of rationing output
would have to wait until the oil market had been stabilized.
Many Middle East oil producers have ramped up deliveries to Asia in
an aggressive fight for market share.
But on the demand side, Morgan Stanley said it was worried about
"Our economists worry that April data showed China may be slowing
... The oil demand data from China should reinforce those concerns,"
the bank said.
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An oil pump jack can be seen in Cisco, Texas, August 23, 2015.
China's official factory activity gauge expanded only marginally in
May, data showed on Wednesday, while a private survey showed
conditions deteriorated for a fifteenth straight month.
Chinese port congestion and the impending refinery maintenance
season will also weigh on crude imports over the next few months,
analysts at BMI Research said.
A rise of more than 20 percent, or almost $10 per barrel, since
early April, has been powered largely by supply disruptions,
especially in Africa and Canada, and as overall demand remains
strong despite China's slowing economy.
(Additional reporting by Henning Gloystein in Singapore; editing by
Jason Neely aand William Hardy)
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