Oil prices are going up one day before the G-20 summit in Japan

Oil prices continue to increase during the last couple of days. On Wednesday prices rose by more than 2% and reached the best result this month so far, ahead of the G-20 summit and OPEC+ meeting. West Texas Intermediate (WTI) crude oil price rose by $1.55, which is a 2.7% increase of the price. It means that the cost of a barrel is $59.38, and the Brent oil price is also going up. The Brent crude oil price increased by $1.44 or 2.2% to settle at $66.49 a barrel. There are several reasons which influenced oil prices.

Oil exports are growing and at the same time stocks are diminishing. U.S. Energy Information Administration announced that crude inventories decreased by 12.8 million barrels last week. It marks the most significant drop since September 2016. Another factor is that U.S. crude oil imports fell by 1.2 million barrels per day. Meanwhile, exports are on the rise, and they reached 3.8 million bpd, and oil exports suppressed the previous result of 3.6 million bpd. The previous record dates back to February.

The fire at the biggest oil refinery on the U.S. East Coast resulted in severe damage to the facility which belongs to Philadelphia Energy Solutions. This refinery has a capacity of 335,000 bpd and shutting down such an important facility will affect the oil market.

The G-20 summit and the OPEC+ meeting

The two major events connected to the oil market which will commence during the next several days are the G-20 summit and OPEC+ meeting. The annual G-20 summit will start working from June 28, and this is a two-day summit. World leaders will discuss the current state of affairs of the global economy among other issues. Another event is the OPEC+ meeting in Vienna, Austria which will take place on July 1-2.

The meeting between U.S. President Donald Trump and Chinese President Xi Jinping is the most anticipated part of the summit. Both sides are interested in resolving their disagreement but should they fail to reach an agreement this might have a negative effect on the oil prices. According to the Bank of America Merrill Lynch analysts if they can’t find the solution oil prices can decrease to $30 per barrel. This is one of the possible scenarios and oil prices might fall because of the new tariffs on Chinese goods. The biggest threat to the current oil prices is that refineries in China can start purchasing Iranian oil in large quantities. This decision will have a direct effect on the WTI prices, and it will drop to $40 a barrel.

The meeting of OPEC+ and how it will end is easier to predict. The current agreement, which is limiting the daily oil production will continue in the next months. There is a chance that member states and their allies will agree to cut the production until the next year.

The oil prices are rising, but its future depends on the OPEC+ meeting and to a greater extent the G-20 summit. The outcome of both events will have a huge influence on oil prices during the second half of the year.