OPEC Could "Relax" Production Cuts

Andrew Cummings
May 27, 2018

Surplus oil supplies in the world's biggest economy swelled by 5.78 million barrels last week, and gasoline inventories expanded by 1.88 million, according to the U.S. Energy Information Administration. US West Texas Intermediate (WTI) crude futures fell US$1.13 to settle at US$70.71 a barrel, a 1.57 per cent loss.

The US government imposed new sanctions on Venezuela following Sunday's re-election of President Nicolas Maduro, a move that analysts say could further curb the country's oil output already at its lowest in decades.

Mitsubishi Corp's oil risk manager in Tokyo, Tony Nunan, projected that Iran sanctions could lower Iranian oil exports by 200,000 barrels-per-day by the fourth quarter (read: 3 Country ETFs May Suffer as Oil Springs Higher).


The price for Brent crude oil was up 0.95 percent as of 9:17 a.m. EDT to $79.97 per barrel, making at least its second run on the psychological threshold of $80 per barrel since Trump's decision on Iran. Currently, the price is sitting right on the neckline and a break under it could be the trigger that begins a drop down towards the main support line, currently at $76.45. The US yesterday hardened its approach to Iran.

U.S. crude oil production for yet another week for week ending May 11-the most recent data available-increased to 10.723 million bpd, according to the EIA.

"Higher prices have begun to impact forward demand expectations and OPEC and Russian Federation, being willing and able to increase production, may have been looking for a way out of the deal which would not upset the market too much", he said.


Tuesday evening the American Petroleum Institute (API) reported that crude inventories fell by 1.3 million barrels in the week ending May 18. "The mere contemplation of it has hit oil prices this week", said John Kilduff, a partner at Again Capital LLC in NY.

The apprehension in India was that OPEC countries, including export leader Saudi Arabia, had persistently denied rising production to offset a price spiral.

The government, however, is still exploring its options and has asked for the public's understanding of the fact that rising oil prices are something the government can not control.


Russia's oil tsar Alexander Novak said ministers from the OPEC cartel and other members of the production pact would discuss how much to increase production next month. That was a surprise increase compared with the 2 million-barrel decline predicted in a Bloomberg survey.

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