Crude oil fell for a fifth day and the euro strengthened before Vienna meetings of OPEC and the European Central Bank. U.S. crude traded below $49 a barrel. The euro climbed to a one-week high ahead of an ECB policy review, while the British pound firmed following its steepest two-day loss since March.
Saudi Arabia is considering backing a ceiling on the group’s collective production, according to Organization of the Petroleum Exporting Countries delegates.
A willingness by Saudi Arabia, the group’s biggest exporter, to support such a limit would be a subtle but significant shift for a country that has been a major proponent of all-out production amid a supply glut that led to a collapse in prices. But Iran later rejected the idea, potentially spoiling an emerging consensus. In the run-up to Thursday’s meeting, OPEC delegates had played down the chances of any coordinated agreement on output. Members remain deeply divided about what kinds of limits, if any, should be agreed upon, and the talks about a ceiling could come to nothing. All OPEC decisions must be unanimous. Markets looked to that ceiling as a kind of guarantee. After OPEC scrapped its production ceiling in December, oil prices descended to 13-year lows within weeks.
Talking about a ceiling represent a return to OPEC’s traditional way of doing business. In recent months, failed discussions have centered on limits on individual countries’ output, whereas a ceiling would place a cap on the whole group’s output. Until December, OPEC had a production ceiling of 30 million barrels a day — a limit it routinely breached.
The economic situation in America may be solid, but there are still fears that the rest of the world won’t be able to withstand higher U.S. interest rates. Global markets have entered June on a circumspect footing with the OPEC and ECB meetings Thursday setting the stage for a month that will also see the U.K. vote on whether to remain in the European Union and a possible interest-rate increase by the Federal Reserve. Wednesday data showed the U.S. manufacturing sector grew more than forecast last month and American employment figures this week will help shape expectations for the timing of the next rate hike.