Published: Sun, June 10, 2018
Business | By Tara Barton

Oil prices fall on dip in China demand, surging U.S. output

Oil prices fall on dip in China demand, surging U.S. output

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. The United States is the second largest producer of crude oil and higher prices have now become more important to the US economy then lower prices.

U.S. West Texas Intermediate (WTI) crude CLc1 was up 38 cents, or 0.6 percent, at $65.11 a barrel.

In North America, however, surging United States output has pressured WTI crude futures.

While Saudi Arabia and Russian Federation have signaled they're ready to raise production, Iraqi Oil Minister Jabbar al-Luaibi told Reuters an output boost isn't on the table when the group gathers in Vienna on June 22.

US investment bank Jefferies said the crude market is tight and spare capacity could dwindle to 2 per cent of demand in the second half of 2018, its lowest level since at least 1984.

Iran would benefit less than Saudi Arabia from an increase in supplies if it can not raise output, as well as receive a lower price for existing production. Trump has complained, meanwhile, that OPEC was inflating the price of oil through artificial means.

Bloomberg reports that the US government has asked Saudi Arabia and some other OPEC producers to increase oil production by about 1 million barrels a day, reflecting US President Trump dissatisfaction with rising fuel prices at the pump, and decision to reimpose sanctions on Iran crude exports that had previously displaced about 1 million barrels a day.

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The European Commission announced yesterday it endorsed a decision to impose duties on imported USA goods in response to US President Donald Trump's move on aluminum and steel tariffs.

OUT OF SYNC Despite this, oil markets are not unanimously bullish.

Venezuela's supply trouble comes amid voluntary production cuts by OPEC which have been in place since 2017 in order to tighten the market and prop up prices.

Further weighing on prices has been rising USA output C-OUT-T-EIA , which hit another record last week at 10.8 million bpd.

"Venezuela's worsening economic crisis, together with ongoing geopolitical tensions in the Middle East, will remain supportive of oil prices", Abhishek Kumar, Interfax Energy senior analyst said.

Crude oil prices came under a modest selling pressure after the weekly report released by the U.S. Energy Information Administration showed that the crude oil inventories increased by 2.1 million barrels for the week ended June 1 amid an increase in output.

As interesting as all these numbers may be, the June 22 OPEC meeting is drawing the most attention right now.

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