Oil May Trade in Tight Range as Greek Poll, OPEC Meeting Loom: Survey

Sri Jegarajah|Reporter, CNBC Asia Pacific

Benchmark oil prices may trade within a tight range this week as participants wait for the outcome of a repeat Greek election on June 17 and the Organization of the Petroleum Exporting Countries (OPEC) meeting to decide production policy on Thursday in Vienna, according to CNBC's weekly survey of oil market sentiment.

The Syncrude oil sands extraction facility near the town of Fort McMurray in Alberta Province, Canada.
Mark Ralston | AFP | Getty Images

Out of a total of seven respondents, five - or nearly three-quarters - expect prices to remain steady, with a single bull and a single bear rounding off the survey.

Broadly, the health of Europe's economy and the lingering debt crisis in the region will continue to set the tone for financial markets. Markets are in 'risk-on' mode now - oil prices rallied by more than 2 percent on Monday after the European Union revealed .

But the rally may run out of steam asinvestors await the Greek election. Still, commodity markets got an additional boost after weekend data from China beat forecasts, allaying fears of a 'hard-landing in the world's second-largest economy. China's crude oil imports in May hit a record 25.48 million tons.

"While there is definitely more potential to move lower than higher...I think that few market participants will have conviction necessary to push or pull prices sharply in either direction ahead of the OPEC meeting on Thursday, which is shaping up to be an important but contentious one, and the Greek elections over that weekend," Justin Honrath, Commodity Analyst at CPM Group told CNBC. "It is more likely that they adopt a 'wait-and-see' approach before re-entering the market."

The tone of Thursday’s OPEC meeting may be tense. Saudi Arabia put itself on a collision course with fellow OPEC member countries on Monday by calling for an increase in the group's output target despite a recent fall in crude prices, Reuters reported.

“Our analysis suggests that we will need a higher ceiling than currently exists,” Saudi Oil Minister Ali al-Naimi said in an interview with the Gulf Oil Review ahead of the meeting. That was at odds with the assessment by Iraq's OPEC President, Abdul Kareem Luaibi, that there is a surplus in supplies from the 12-member group, Reuters said.

Oil markets fell on those comments on Monday and ANZ Research said U.S. crude futures “could see prices test support just below $80 a barrel in the near term.”

Tom Essaye, President at Kinsale Trading added Al-Naimi’s comment “certainly isn’t bullish” though it’s possible the market may discount the remarks “since it’s widely known that OPEC members produce more than their quota anyway.”

By CNBC's Sri Jegarajah