Oil Prices Slide Due to U.S. Withdrawal From Climate Deal
By: Eddy Peng Jun 2, 2017
Crude oil continues to drop for a third straight day approaching the 3-week low on Thursday. It was down 0.558 cents, or 1.15 percent, closing at $47.798 a barrel. On today’s trading, oil prices declines amid worries that U.S. President Donald Trump’s decision to abandon the Paris climate pact could lead to more crude drilling in the United State, stoking a persistent glut in global supply.
President Donald Trump said he would withdraw the U.S. from the Paris climate pact, commenting that the accord likely favours other nations at the expense of American workers, a move that angered European allies, corporate executives and religious leaders.
“We are getting out, but we will start to negotiate and we will see if we can make a deal, and if we can, that’s great,” Trump said Thursday, arguing the pact actually benefits China and India, rather than U.S. “And if we can’t, that’s fine.”
The U.S. withdrawal from this pact could increase the supply-side equation from the United State and complicate OPEC’s forward projections. It is a scenario that would not be favourable to oil prices and even keep pushing it down further. Surging U.S. production would be reducing OPEC’s members’ efforts to curb production to drain a global crude supply overhang and to bolster prices, a deal of oil production cut that the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC members met in Vienna to roll over the output cut deal to reduce 1.8 million barrels per day (bpd) until the end of next March.
Crude stockpiles were down to 6.4 million barrels in the week to May 26, beating analyst analyst expectations for a decrease of 2.5 million barrels. However, U.S. crude production climbed to 9.34 million bpd last week, by 500,000 bpd from a year ago.
Technically crude oil prices still remain in a technical downtrend. Graphically prices remain trading beneath both the displayed 5-day MA (moving average) and 60-day MA. The 5-day MA for crude is currently found at $48.504. This line is acting as a value of resistance in the short term. In the event that prices keep decreasing further, traders may look for crude oil to challenge March 22’s lows at $46.464.
Chart 1: WTICOUSD Daily
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