Oil prices fell on Monday as the Organization of Petroleum Exporting Countries maintained its high output in the month of May. OPEC produced 31.22 million barrels per day for the month, a two-and-a-half year high. This number is well above its target of 30 million barrels a day, as well as above its demand. Oil prices collapsed during the second half of the year as US production soared and OPEC decided not to cut production to limit supply.
OPEC’s decision was based off of not wanting to lose market share to other major oil producers. The 12-member cartel is meeting again on Friday in Vienna, but it is not expected to lower its current production target. This will keep global supply well above demand, causing an imbalance in the market. Oil had jumped on Friday after it was announced that US oil rigs had fallen once again, but US production should actually increase during the second half of the year.
The fall in oil prices on Monday was also caused by the US dollar index increasing 0.3% against a basket of other major currencies. The increased value of the dollar makes oil more expensive for holders of other currencies, making it a less attractive investment. The current fundamentals of the oil market point to the liquid commodity falling during the second half of the year, although a fall to the lows seen this year is unlikely..