Crude oil futures see mixed monthly trade ahead of crucial Opec meeting

Crude oil futures traded higher on 29 May, finished higher for the week but logged mixed trade for the month, amid declining US drilling activity and ahead of a crucial Opec meeting, scheduled for 5 June.

Brent July contract finished $2.98, or 4.8%, higher at $65.56 a barrel on Friday.

The global benchmark inched up 0.3% for the week as a whole, but lost some 1.8% for the month as a whole.

US July contract finished $2.62, or 4.5%, higher at $60.30 a barrel on Friday.

Prices rose about 1% for the week and 1.1% for the month.

The number of US rigs actively drilling for oil fell for a 25th week in a row, according to data from Baker Hughes. The number of active oil rigs dropped by 13 during the week to 646 as of 29 May.

In other news, the biggest US exchange-traded fund (ETF) that tracks oil – the United States Oil Fund -- was heading for its largest two-month outflow in six years, Bloomberg reported.

But industry insiders told MarketWatch that flows for the ETF and other popular oil ETFs should not be blamed for crude's moves as they often are.

TD Securities said in a note to clients: "The Opec meeting on [5 June] marks the first official meeting after the group broke with tradition and decided to not support the crude oil price environment by cutting production in November last year.

"At current prices, there is little incentive for the group to cut quota, confirming global oversupply will endure. We have a strong conviction (around 85%) that they leave the quota unchanged, and while that is generally the same conviction as in the market, should result in a modest bearish move as some longs get liquidated.

"Any cut to quota would see a very bullish move in the market, while there also may be some focus on comments from Saudi Oil Minister al-Naimi or new Saudi Aramco Chairman al-Falihif they provide any forward price guidance, which we think they may try to anchor to around $70 bbl for year-end.

"Overall, we look to sell any modest bounces in August-delivery Brent at $64 bbl with target at $59.50 bbl, stop at $65 bbl."

Earlier in the week, Capital Economics said in a note: "The next meeting of the Organisation of the Petroleum Exporting Countries (Opec), on 5th June, is set to be almost as closely watched as the previous one in November. The recent rebound in oil prices has taken some of the strain off Opec members, but prices remain about 40% below their level this time last year and some countries are still calling for production cuts.

"What's more, there has been much speculation about the potential for closer cooperation between the cartel and Russia.

"However, most comments from key Opec ministers seem sanguine and it is not clear that even if they did cut their production target, actual output would fall."