Daily oil market overview

The oil prices are higher at the time of writing. They managed to regain their strength that was undermined after OPEC meeting on May 25. The market participants expected deeper and longer cuts from OPEC market, but were disappointed with the meeting’s outcome. Since then they have been selling into every bounce.  On Monday, oil prices were hit by announcement that Saudi Arabia, Egypt, UAE and Bahrain cut their links with Qatar seeking to punish the country for according assistance to Islamist groups. Traders feared that a political rift between these Arab countries would undermine OPEC’s effort to curb global oil glut.

Tuesday was a happy day crude oil futures. As market realized geopolitical tension is unlikely to become more severe in the Middle East, with Qatar clearly wanting to diffuse the politically charged environment rather than to escalate it. Qatar’s policymakers have recently pledged to adhere to their commitment under the output cut agreement.  Even if it did refuse to comply with OPEC agreement, the implications for the oil market would be minimal, given the fact that Qatar’s commitment to cut amounts to just 30,000 barrels a day.

Today analysts expect US official data from the Energy Information Administration to print a ninth-straight decline in domestic crude inventories. This should offer some support to currently falling oil prices.

At the present moment, Brent oil futures are hovering near $49.80. If the EIA data does reveal a drop in the US crude oil inventories, the futures will rise higher towards the psychologically resistance at $50 or higher.