Published: Sun, June 10, 2018
Finance | By Loren Pratt

Oil prices stable on Venezuelan supply trouble

Oil prices stable on Venezuelan supply trouble

"This is occurring because of the rapid increase in production from USA shale coupled with the tightening of supplies elsewhere through the actions of OPEC and Russian Federation", said William O'Loughlin, investment analyst at Australia's Rivkin Securities.

More generally, Brent has been pushed up by voluntary production cuts led by the Organization of the Petroleum Exporting Countries and Russian Federation, which were put in place in 2017. United Kingdom drivers should feel some reprieve when the late-May drop in underlying crude prices filters through, but they, along with the rest of the market, will remain at the mercy of U.S. and Opec politics.

"The big question for oil is whether or not OPEC decides to ease the production cuts, with the meeting still some two weeks away, oil traders could be in for an increased bout of volatility". Saudi Arabia took this decision because high oil prices could help the stock exchange float of the Saudi Aramco's stake. Treasury Secretary Steve Mnuchin told reporters last month the us held discussions with "various parties" to pump more to offset a drop in Iranian exports due to renewed USA sanctions. However, the deal will expire at the end of this year.

This year, fund managers racked up a record bet on a continued rise in oil prices, but the sustained increase in U.S. shale production, and now the prospect of higher Opec supply, have prompted many investors to pare those positions.

Mexican oil output could return to 2 million barrels per day (bpd) by about 2022 from 1.886 million bpd in April if the next government pursues plans to auction off development blocs to private investors, Energy Minister Pedro Joaquin Coldwell said on Tuesday. This much tighter market is easily spooked by threats to supply. US oil production is up 1.5 million bpd from a year earlier.

Saudi Arabia and Russian Federation were already discussing raising Opec and non-Opec oil output by about 1-million bpd, sources familiar with the matter said on May 25. "We always have conversations with the U.S. about the stability of the oil market". US proved reserves totaled about 33 billion barrels, according to the OPEC bulletin.

Oil ministers from OPEC will be meeting at the group's Vienna headquarters to discuss output policy.

Somewhat akin to a broken clock that can be relied upon to tell the correct time twice a day, the analytical community isn't shy about making predictions, and Daryl Guppy, a trader and special consultant to AxiCorp, proposed that the current price pullback is "not a change of trend, but it's instead just a temporary retreat".

Reuters reported in late May that OPEC and its allies could raise production by about 1 million bpd from July to address any potential oil shortages.

Oil prices have advanced since the Organization of Petroleum Exporting Countries and allied producers began cutting output in January 2017 to drain a global glut.

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