Doubts Over OPEC Weigh on Crude Prices

Roman Schwartz
June 13, 2018

Oil prices edged higher on Wednesday, turning positive after US government data showed a bigger weekly draw than expected in domestic crude inventories along with unexpected declines in gasoline and distillate stocks.

"Prices are unlikely to increase as sharply as they did from mid-2017 onwards and thus the dampening effect on demand will be reduced", the IEA said in its latest monthly report.

Dutch bank ING, however, said some OPEC members would "struggle to push production back to October 2016 levels". But the countries pushing for looser policy face staunch opposition from Iran and Venezuela, both under sanctions from Washington.

The U.S. move has put pressure on European and Asian clients to stop importing Iranian oil or doing business with the country. And while purchases have waned as shale production has grown, America is traditionally one of the biggest customers for Saudi oil.

OPEC is a group of 14 nations that seeks to coordinate oil production and greatly influence oil prices. Prices have risen around 60 per cent over the a year ago.

Some countries have already increased production, and analysts have said the outlook for the oil market for the rest of 2018 is uncertain as OPEC countries prepare to meet June 22-23 in Vienna to discuss output.

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"I think in the near future there will be time to release supply", Saudi Energy Minister Khalid Al-Falih said at the St. Petersburg International Economic Forum in Russian Federation in late May.

He last raised the issue in April.

"Looks like OPEC is at it again".

Trump drew lots of tweeted responses, including one from oil hedge fund founder Pierre Andurand, who expects prices will be above US$150 a barrel in less than two years. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High!

Rising US stocks are in part a result of the surge in US crude oil production, which has jumped by nearly a third in the last two years to a record 10.8 million barrels per day (bpd). "At current prices USA oil producers are still losing money".

-With assistance from Michael Roschnotti.

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