June 22 (UPI) — Crude oil prices inched into positive territory in early Wednesday trading as a tropical storm threatened port facilities in the U.S. Gulf of Mexico.
The January implementation of an agreement led by the Organization of Petroleum Exporting Countries, with help from key producers like Russia, helped establish a floor under crude oil prices of around $50 per barrel during most of the first half of the year. Last month, parties to the agreement agreed to extend, rather than enhance, the arrangement — a disappointment to many investors.
Prices came under additional pressure in early June when Saudi Arabia, the main contributor to the OPEC move to cut production, led a regional effort to sever ties with Qatar, a fellow OPEC member, because of alleged support for terrorist groups like al-Qaeda and the group calling itself the Islamic State.
Additional price pressure came from signs of a delayed market balance, with U.S. crude oil and gasoline inventories building up for much of the month. The American Petroleum Institute late Tuesday reported U.S. crude oil inventories declined 2.7 million barrels last week and, while gasoline inventories increased, they rose less than expected.
Tropical Storm Cindy, meanwhile, is strengthening in the U.S. Gulf of Mexico and slowing port operations in the region.
About a half hour before the start of trading in New York, the price for Brent crude oil was up 0.35 percent to $46.18 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was up 0.46 percent to $43.71 per barrel.
The head of Russian oil company Lukoil said Wednesday that recent declines in crude oil prices were temporary, but added stability was needed to ensure a steady course for investment plans. Lower crude oil prices means less capital for exploration and production, though some areas like U.S. shale oil have been more resilient to the weakened market than others.
In mid-June, the official Kuwait News Agency, also known as KUNA, said sources close to OPEC were considering deeper production cuts to ease the supply overhang. Speaking Wednesday, Iran’s oil minister said OPEC officials were reviewing market conditions, but stressed it was too early to consider extraordinary action.
“Curbing production has always been a difficult task in OPEC,” he was quoted as saying by the ministry’s news website SHANA.
Prices faced pressure overnight after a shake-up in the Saudi government. The market may be influenced later in the day when the U.S. Energy Information Administration publishes official data on inventory levels. Deviation from API numbers could make or break the morning’s momentum.