Oil steadies but threat of higher supply curbs gains

Fredrick Soto
June 17, 2018

Question marks over global economic growth, and resulting oil demand, as well as over United States producers' capacity to pump oil at an ever faster pace make forecasting hard, the Organization of the Petroleum Exporting Countries said in its regular monthly oil market report.

Their combined strength should also give them a say over matters such as oil exports from Iran after the U.S. pullout from the Iran nuclear deal.

Trump sparked the latest back-and-forth when he renewed his attack on OPEC in a tweet on Wednesday that said oil prices are too high and that the cartel was "at it again". The IEA said OPEC countries in the Middle East could quickly boost production by 1.1 million bpd.

Arab oil ministers who met in Kuwait earlier this month agreed that if there is a decline in prices toward the $60s, then OPEC would keep the deal in place until its next meeting in November, two sources familiar with the matter said. Meanwhile, oil demand in the non-OECD is now projected to grow by 1.27 mb/d, showing a downward revision of 0.02 mb/d from last month's assessment.

The price of West Texas Intermediate crude oil is now $66.60 a barrel.

Saudi Energy Minister Khalid al-Falih said he expected a reasonable and moderate agreement next week when OPEC and non-OPEC oil producers meet. USA crude traded Wednesday near $67 a barrel.

But uncertainty "warrants close monitoring of the factors impacting both world oil demand and non-OPEC supply that will shape the outlook of the oil market going forward", the report said.

Russian Federation and Saudi Arabia are leading a campaign to justify rolling back some of the OPEC/NOPEC production cuts, and are facing opposition from a bloc within OPEC consisting of Iran, Venezuela, and Iraq who oppose boosting production, also because those three don't have the spare capacity to lift production, unlike Russian Federation and the Saudis.

But the USA request and a Trump tweet in April that blamed OPEC for high oil prices has caused a split within the oil group, with some members accusing Saudi Arabia of being too eager to do Trump's bidding.

International Energy Agency (IEA) sees India and China fuelling half of global demand growth in the next five years, with India driving incremental demand growth through the next two decades.

"Iran has already signaled that it will resist any such attempts and blames the US for the price rise".

Brent crude LCOc1 was up 87 cents, or over 1 percent, at $76.75 a barrel by 1:38 p.m. EDT (1938 GMT).

USA crude inventories fell by 4.1 million barrels, to 432.4 million barrels. So far, India has not been able to bargain better rates from the Gulf-based producers of the oil cartel, OPEC.

Saudi Arabia has enjoyed diplomatic ties with the U.S. for decades, and may be facing strong pressure to temper oil prices as President Donald Trump targets Iran - the kingdom's political rival - with sanctions.

Prior to Trump's April tweet, the price of oil had soared from $50 a barrel last fall to over $70.

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