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Oil prices mixed, but pressure persists from plan to raise production

31 May, 2018, 22:07 | Author: Sara Gill
  • Oil prices fall as supply from top three producers set to rise

While the Saudi's wanted oil at higher levels to facilitate the floating of Saudi Aramco, equally they are hearing the displeasure from the USA about the effect a high oil price is having on their economy - it appears a happy medium could be achieved in the $60-70 range for Crude.

The correction is mainly due to Saudi and Russian Federation declaring their intent to increase oil supplies by some 1 million bpd as compensation to Venezuela's output dropping to 1.5 million bpd in April, a fall of 260,000 b/d from January, and upcoming sanctions on Iran, OPEC's third biggest producer.

VIDEO: Oil prices correcting, but which price range is "sweet" for investors?

It's a view endorsed by Helima Croft, global head of commodity strategy at RBC Capital Markets, who pointed out that regardless of the quid pro quo, "the Saudis have higher revenue needs, so I think its going to be a fine line". In the week to May 15 the combined net-long dropped below one million lots to a five-months low. "It's far from unlikely that we will see US$100 again", Petroleum and Energy Minister Terje Soviknes said in an interview in Oslo on Tuesday. With the mid-term elections for the houses of Congress due towards the end of this year, President Trump seems against a sharp ramp up in oil prices for fear of alienating his middle and working class voter base. It collapsed from almost $100 a barrel to $50 and then it sank below $30 in early 2016. Oil had reached a more than 10 year low, dropping to less than $30 a barrel. He added that his company could absorb higher transportation costs brought on by rising fuel prices.

Venezuela's oil output has taken a sharp turn lower in recent years, with the country facing an economic crisis of chronic food shortages and spiking inflation. In the event that other countries fall in line with the United States and impose sanctions on Iran, supply from Iran could fall by as much as 1m/bpd.

The prospect of lost exports from Iran in the face of renewed US sanctions and falling output in crisis-afflicted Venezuela is coaxing the producers to start winding down the historic deal, CNBC reported.

Opec, which announced in 2017 that it would withhold oil to push up prices, did not fill the supply gap left by the missing Iranian barrels at the time of the sanctions.


This past week, however, it was not crude oil and products that provided the gains.

It is normal to have short-term blips in oil prices, which are driven by fear rather than fundamentals, Slaughter said.

The short-term focus will center on the June 22 Opec meeting in Vienna. The group's Joint Ministerial Monitoring Committee said Friday compliance was 152% for April.

India's Reliance Industries Ltd, owner of the world's biggest refining complex, plans to halt oil imports from Iran, two sources familiar with the matter said. The rise of U.S.

Bearish traders are also reacting to concerns over surging US production. US production broke 10 million bpd for the first time in 48 years in November. This is primarily due to crude oil's surge to a 3½-year high on supply worries related to Venezuela and Iran.

The fall in prices of oil for drivers has been welcome news as it has been for companies that purchase large amounts of energy.

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