Oil prices slip on expectations of higher supply

Roman Schwartz
June 10, 2018

While the numbers are in an of themselves a concern to those who worry about another global glut, Andrew Lipow, president of Lipow Oil Associates, pointed out that "The continuing increase in crude oil production is weighing on the market, and quite significantly compared to this time past year".

In similar fashion, the metal for delivery in July contracts was trading higher by Rs 32, or 0.73 per cent to Rs 4,387 per barrel in 272 lots.

While the USA government has often expressed opinion against OPEC's oil price-fixing policies-including a recent comment by President Donald Trump, asking for a specific amount of oil production boost is a rare move, Bloomberg's sources noted.

A USA call for more oil from OPEC and a negative trend line for the price of Brent crude oil helped lead oil prices toward a second day of declines on Tuesday.

The surge in USA production has pulled down WTI into a discount versus Brent of more than $11 a barrel, its steepest since 2015.

"Nevertheless, growing prospects for an increase in production from the "OPEC Plus" and rising oil output from the USA will cap price gains".

The US call for more oil comes despite its own record-setting production.

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Global oil prices rose during Asian trade on Wednesday after Venezuela raised the prospect of halting some crude exports, according to people familiar with the matter, but gains were capped amid reports the USA government had asked Saudi Arabia and some other OPEC producers to increase output, Reuters reports.

Crude oil futures ticked higher Wednesday in Europe, with the market focusing on the longer term picture of tighter OPEC supply rather than the bearish inventory builds announced by the US Energy Information Administration this week.

A day before US President Donald Trump withdrew from the Iran nuclear deal, one of his senior officials phoned Saudi Arabia to ask the world's largest oil exporter to help keep prices stable if the decision disrupted supply. Data out of China showed a dip in May crude imports to 9.2 million barrels per day, down from the record high seen in April of 9.6 million barrels per day.

Pradhan's remark builds on the rumours earlier this week of the US government unofficially asking the Saudis and other OPEC producers to increase output - because of USA president Donald Trump's charge that the cartel had been artificially boosting prices under its output reduction initiative (for the record, India has also repeatedly expressed its frustration over rising oil prices).

OPEC and its allies will gather at a June 22 summit that's likely to be contentious. OPEC should discuss "the constraining effects of unilateral sanctions imposed by the United States of America, which represent an extraordinary aggression, financially and economically, for our national oil industry's operations and the stability of the market".

The price of oil has been under pressure given the potential for a trade war escalating over Washington's pursuit of tariffs.

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