Russia Boosts Oil Output With Commitment to OPEC Cuts Waning

Crude Oil

Crude Oil

Oil prices were mixed on Monday, caught between the downward pull of rising Russian production and US oil drilling activity at its highest since 2015, and upward pressure from strong demand, especially in Asia. The figures were first reported by Interfax.

Finally, sellers were also responding to another rise in new rigs drilling for oil in the United States. According to Baker Hughes, the rig count rose by one last week to 862, it's highest since March 2015. This suggests USA crude output, already at a record 10.8 million bpd, will climb further.

Question marks over global economic growth, and resulting oil demand, as well as over United States producers' capacity to pump oil at an ever faster pace make forecasting hard, the Organization of the Petroleum Exporting Countries said in its regular monthly oil market report.

Yesterday, Iraq's Oil Minister Jabbar al-Luiebi said Baghdad "rejects unilateral decisions by some oil producers without consulting the rest of the members" of OPEC, clearly signaling that Saudi Arabia, leader of the OPEC pack as it may be, is not free to raise production without telling anyone about it. Related: Can Saudi Arabia Prevent The Next Oil Shock?

A senior USA official had called Saudi Crown Prince Mohammed bin Salman before President Trump announced his decision on the Iran nuclear deal, to make sure that the United States could count on OPEC's largest exporter and de facto leader Saudi Arabia to keep prices stable, because Washington was concerned that the sanctions could drive oil prices up.

At 0325 GMT, July WTI crude oil is trading $66.12, up $0.02 or +0.03% and August Brent crude oil is at $76.39, down $0.07 or -0.09%.

OPEC will meet on June 22 to discuss a potential change to its oil production. Traders aren't sure what to expect from the meeting.

Earlier in the month, the market sold off sharply as investors priced in the possibility of increased production from Saudi Arabia, Russia and other major producers. However, the market bottomed last week after Venezuela said it may have to cancel all of its delivery contracts.

Production fell in Nigeria, Libya and Venezuela, but increased in Saudi Arabia, Algeria and Iraq.

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