OPEC's suggestion of more oil drags markets lower

27 May, 2018, 04:40 | Author: Gladys Mathis
  • MID-DAY: Oil continues to slump on reports of higher production; North Korea US tensions weight Wall Street

Oil prices slid for a third day in NY after Russian Federation signaled that phasing out historic supply curbs that eliminated a worldwide glut may be on the table.

Sources familiar with the matter said an increase of about 1 million bpd would lower compliance to 100 percent of the agreed level.

US crude and distillate stockpiles fell last week, while gasoline inventories increased unexpectedly, data from industry group the American Petroleum Institute showed on Tuesday.

Saudi Energy Minister Khalid al-Falih said the easing of restrictions would be gradual so as to not shock the market, noting that producing countries would soon have the capacity to liberalize supply and that this could probably happen in the second half of 2018.

Venezuela's output has fallen amid an economic crisis, while Iran's supply is threatened by USA sanctions.

The US government imposed new sanctions on Venezuela following Sunday's re-election of President Nicolas Maduro, a move that analysts say could further curb the country's oil output already at its lowest in decades.

OPEC and some non-OPEC major oil producers are scheduled to meet in Vienna on June 22.

Limiting the upward pressure on prices is rising supply in the USA, where shale production is forecast to hit a record high in June.

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The direction of the market today is likely to be determined by trader reaction to the U.S. Energy Administration's weekly inventories report.

Concerns about USA sanctions pressure on Iran, one of the top producers in the Organization of Petroleum Exporting Countries, and a historic decline in production from Venezuela helped push the price of Brent crude oil toward $80 in recent sessions.

He spoke after talks with his Russian counterpart Alexander Novak, who said the output boost would start in the third quarter, if it's approved by other members of the group.

"If sanctions are introduced against Iran, most of the OPEC producers would like to be pumping more oil, particularly giving the higher prices".

The Organisation of the Petroleum Exporting Countries (Opec) may decide to increase oil output to make up reduced supply from Iran and Venezuela, in response to concern from Washington over a rally in oil prices, Opec and oil industry sources told Reuters.

The plans to now lift production again come amid worries that Iran's exports will decline after the U.S.'s decision to pull out of the nuclear deal with Tehran and as output has collapsed in Venezuela.

How this will be implemented will now be the topic of discussion in coming weeks, but it looks clear that key OPEC figures are responding to growing consumer pains of high prices, strong demand for the remainder of the year and the reality of less oil from Venezuela and Iran.

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