Oil prices slip as USA and Russian supplies grow

Crude Oil

Crude Oil

The upcoming OPEC meeting on June 22 is shaping up to be a contentious one, after news broke that the US government asked Saudi Arabia to increase oil production before Washington pulled out of the Iran nuclear deal. Venezuela's national oil company, PDVSA, was historically led by highly respected technocrats and oil engineers, and contributed greatly to the country's wealth and prosperity.

OPEC and its allies are headed for a fractious meeting in Vienna next week as Saudi Arabia, under pressure from President Donald Trump, seeks to revive halted output to prevent higher prices.

But for the meantime, it seems that expected and feared increased output from OPEC is something that will be delayed in favour of further supporting current prices - as well as the overall stability of supply and demand. The Obama administration wanted the cartel to offset disrupted Iranian production, after an global coalition put stringent sanctions on Iran in 2012.

Russian Energy Minister Alexander Novak told reporters that members of the OPEC-plus production cut deal can consider returning up to 1.5 million bpd to the market gradually.

"Looks like OPEC is at it again", Trump tweeted in April. Also sending prices higher are production cuts in Venezuela and Washington's decision to reimpose sanctions on Iran after the US withdrew from the Iranian nuclear deal. He said that OPEC would not simply comply with Washington's requests. The Islamic Republic - and Venezuela - have written to OPEC members urging them to unite against American sanctions, while Iran also complained that "fellow ministers" had tried to speak on behalf of the entire group, which is required to operate by consensus.

Crude oil prices turned lower in early Monday trading amid broad-based economic concerns over the fallout from weekend meetings of the G7 in Canada. "How arrogant and ignorant one could be (to) underestimate the history of 60 years' cooperation among competitors", he said.

In part because of strong demand, US crude inventories C-STK-T-EIA fell by 4.1 million barrels in the week to June 8, to 432.4 million barrels. So, over a one-year period, USA oil exports soared by more than 100%.

Iraq faces both technical constraints on boosting supply and a political clash with its Kurdish population that's impeded exports, and so may have little to gain from any OPEC agreement to raise production. It could set the stage for a heated meeting in Vienna in two weeks' time.

Speculation that the buffer could decline from three per cent to two per cent of global demand would bring the spare production capacity down to levels not seen since 1984. But the Saudis were shot down by much of the rest of the group, which opposed lifting output.

Although not exactly the same, the differences back then echo those of today.

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