Wednesday, 20 June, 2018

OPEC, Russia prepared to raise oil output amid United States pressure

Oil prices fall as supply from top three producers set to rise Billions wiped from ASX energy companies as oil price falls
Lindsey Cook | 30 May, 2018, 18:37

West Texas Intermediate dropped as much as 3.1 percent, while Brent crude futures, which traded above $80 a barrel last week, slumped near $75 in London Monday.

Meanwhile, surging US crude production showed no sign of abating as drillers continued to expand their search for new oilfields to exploit.

With no elections in sight, the chances of the centre or even the state governments reducing their taxes are quite slim and the only hope for us is the global correction in oil prices which are expected to fall below $60 from the current $75.34 price.

Monday May 28 saw another price tumble for oil prices, after crashing down last Friday.

US crude output has already surged by more than 27 percent in the past two years, to 10.73 million bpd, ever closer to Russia's 11 million bpd. However, the existence of these risks mean that oil prices are likely to remain volatile, witnessing periods of spikes should any of these risks escalate.

"Structurally there shouldn't be enough pressure on the market to take us back into that very high-priced world", said Andrew Slaughter, an energy expert and executive director at consulting firm Deloitte Services LP.

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Phil Flynn, senior market analyst at Price Futures Group, told MarketWatch that with Brent crude, "there is a perception that supplies are tighter in Europe, and they are more susceptible to feel the loss of Iranian supply".

The production cut initiated by OPEC and 11 other oil-producing nations including Russian Federation, has removed about 1.8 million barrels a day from global production since it went into effect in January 2017.

Again, there is a geopolitical angle, with China, the world's biggest crude importer, under political pressure by President Trump pressure to buy more from the United States in order to lower the USA trade deficit with China. USA production broke 10 million bpd for the first time in 48 years in November.

But now, the memory of oil at US$30 is still too fresh, and a lot of oil consumers enjoyed faster economic growth thanks to cheap oil-they may be unwilling to pay so much more so soon. Further, since the election win of President Nicolas Maduro, the risk of United States imposing sanctions on Venezuela's oil industry have risen and if imposed could lead to further supply disruptions.

Baker Hughes (BHGE) on Friday reported that the number of active US rigs drilling for oil (http://www.marketwatch.com/story/US-oil-rig-count-makes-biggest-weekly-climb-since-february-2018-05-25) rose 15 to 859 in the most recent week. There was talk a few months ago that this five-year average may not be the best measure of global oil supply. US crude CLc1 was up 40 cents at $67.13.

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