A combination of increased supply and expectations that OPEC would eliminate cuts in oil output placed pressure on oil prices Wednesday, but a drop in U.S. crude stockpiles caused oil ETFs to start on the up side. As of 11:00 am Eastern Daylight Time, oil prices were up slightly at 0.11%.
Oil ETFs responded on the positive side early in the market opening with United States Oil Fund (NYSEArca: USO) up 0.36%, Invesco DB Oil Fund (NYSEArca: DBO) up 0.19%, ProShares Ultra Bloomberg Crude Oil (NYSEArca: UCO) up 0.88% and, VelocityShares 3x Long Crude Oil (NYSEArca: UWT) up 1.19%.
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OPEC and non-OPEC oil producers like Russia started withholding output in 2017 in order to reduce a global supply, causing prices to rise 60 percent within the last year. Nonetheless, market analysts say the outlook for the oil market in the second half of 2018 is uncertain and OPEC is quick to point out the downside risks of global demand for oil.
“More oil from OPEC+ is the base case,” said Bjarne Schieldrop, a chief commodities analyst at Swedish bank SEB. “Saudi Arabia and Russia have already started to lift production. Unofficial sources have said that Russia will propose to return production back to the October 2016 (level), i.e. removing the cap altogether over a period of three months.”
On Tuesday, the American Petroleum Institute said crude oil inventories rose by 830,000 barrels in the last week to 433.7 million. The OPEC meeting on June 22-23 in Vienna will also weigh in heavily on what oil prices will do in the next few weeks.
“With rising production from U.S. shale adding to oil’s woes and reviving oversupply concerns, further downside could be a possibility in the short to medium term,” said Lukman Otunga, an analyst at futures brokerage FXTM.
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