Oil slips on U.S.-China trade dispute, OPEC supply outlook

Sean Reid
June 22, 2018

Saudi Arabia and Russian Federation have already boosted production modestly, and have indicated they were prepared to increase output at that meeting, Reuters reported. It is said, though, that US and Saudi Arabia have been discussing ending the OPEC/non-OPEC pact long before this week's meeting and Saudi is going to propose what is in fact a USA -induced decision in Vienna. Iran is a fierce regional rival to Saudi Arabia, meaning the OPEC deal could also influence the geopolitics in the Middle East.

Oil prices fell on Thursday as crude producers appeared to be nearing a deal to increase production at an OPEC meeting in Vienna on Friday, but pared losses after a report of a large stockpile draw at a key storage in the United States.

According to one OPEC source who spoke to Reuters, the Saudi proposal of a 1.5-million-bpd production boost was "just a tactic", to have wiggle room to negotiate a compromise with other OPEC members and settle on a lower number for the increased production, possibly between 500,000 bpd and 700,000 bpd. "The Opec/non-Opec cartel is the big beneficiary of all this oil diplomacy, as it will squeeze global spare oil capacity and likely push up crude prices".

On the rising oil prices in the country, the minister assured that the government would leave no stone unturned to keep these products within the reach of the common man. I mean, Iran, Saudi Arabia, Russia etc. The final decision needs to be unanimous for OPEC, however, and many analysts expect the meeting to be a disaster.

OPEC meets June 22 in Vienna to decide on the future of its production cut agreement, which committed the bloc, along with 10 Russia-led non-OPEC countries, to a 1.8 million b/d supply cut.

A cut in Chinese purchases of USA oil may also benefit Iran's sales, which Washington is trying to curb with new sanctions it announced in May.

Meanwhile, US drillers added one oil rig last week, bringing the total count to 863, the highest number since March 2015 reported. "Now all countries want to extract more oil and the price of each barrel nearly costs twice as much as on the day of signing the agreement", he explained. It said China takes around 20% of all United States crude exports. Brent crude jumped $1.55 to $74.99 a barrel. "Combined with Iranian sanctions, more floating storage, this could reverse the decline in OPEC-related tonne-mile demand that resulted from the production cuts of 2017", the broker said. OPEC output was last lower in April 2017 at 31.85 million b/d, the last month before West African producer Equatorial Guinea became its newest member.

"In this meeting and the 7th Opec International Seminar, a unique assembly of Ministers, heads of intergovernmental organisations, chief executives of national and international oil companies, industry leaders, academics, energy experts and media, we will review the noteworthy progress that we are making", he stated.

"This renewed commentary by Novak that they're looking for 1.5 million bpd of production is putting downward pressure on prices in a significant manner. We are trying to control the prices", he told.

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