Oil prices rise on Venezuelan supply troubles, but US output surges

Adjust Comment Print

Global benchmark, Brent crude shed 79 cents, or 1.1 per cent, to $74.59 a barrel, aiming for the lowest settlement since May 8.

"The rise in stockpiles was also driven by a strong increase in imports, with Saudi Arabian crude nearly doubling to 1.12 million b/d last week", ANZ bank said in a note.

The average price for a barrel of OPEC's reference basket of 14 different crude oil varieties rose from $40.76 in 2016 to $52.43 in 2017.

Brent crude futures settled up $1.96 a barrel, or 2.6 percent at $77.32.

The surge in U.S. production has pulled down U.S. WTI crude into a steep discount versus Brent to more than $11 per barrel, its steepest since 2015.

The group and Russian Federation are due to meet at its headquarters in Vienna on June 22 to discuss production policy."The June 22 OPEC meeting will now likely become the most important factor influencing (the) crude price", Jefferies said.

"The oil price is being driven by OPEC and views on how much and how quickly "OPEC plus" will raise output", Energy Aspects analyst Virendra Chauhan said.

The American Petroleum Institute reported Tuesday that crude stockpiles fell by 2 million barrels in the week ending June 1.

Oil prices hit a 3-1/2-year high of $80 per barrel in mid-May on concerns about a possible supply shortage fueled by new USA sanctions against OPEC member Iran.

Customers waiting for cargoes include U.S. Chevron Corp, India's Nayara Energy and China National Petroleum Corporation (CNPC).

Three sources familiar with the matter said a senior United States administration official had called Saudi Crown Prince Mohammed bin Salman before Trump's announcement to make sure Washington could count on Riyadh, the de facto OPEC leader. At this price point, Saudi Arabia will not seek to restrain Opec output and USA shale oil output would not be uneconomic. The US last pressed Riyadh to increase output in 2012.

"The continuing increase in crude oil production is weighing on the market, and quite significantly compared to this time previous year", Andrew Lipow, president of Houston-based Lipow Oil Associates.

Oil prices gained Tuesday after Brent crude hit its lowest price in roughly a month following a report the US government asked Saudi Arabia and other major exporters to increase oil output.

Donald Trump asked for Saudi Oil Support one day before he announced the end of Iran Nuclear Deal.

OPEC and its allies will gather at a June 22 summit that's likely to be contentious.