Published: Sun, May 27, 2018
Money | By Wilma Wheeler

Big oil consumers start to lock-in prices as Brent urges to $80

Big oil consumers start to lock-in prices as Brent urges to $80

The Organization of the Petroleum Exporting Countries may decide in June to lift output to make up for reduced supply from Venezuela and Iran, the latter in part due to the United States decision to withdraw from the Iran nuclear arms control deal, Opec and oil industry sources told Reuters.

Brent crude futures were trading $1.08, or 1.4 percent, lower at $78.45 a barrel as of 10:54 a.m. EDT, while USA crude lost 85 cents to $71.35 a barrel. But commercial USA crude inventories rose C-STK-T-EIA by 5.8 million barrels in the week to May 18, beating analyst expectations for a drop of 1.6 million barrels, the Energy Information Administration (EIA) said on Wednesday.

However, the bulls would argue that such reversal-looking patterns continue to fail to work against a strong fundamental backdrop, with OPEC producing less oil than agreed and sanctions on Iran point to further declines in OPEC production.

Oil has been easing from its 2018 top as OPEC says it intends to raise production to compensate the potential loss from Venezuela and Iranian output.

Such a decision is possible because of fears about a possible decrease in the supply of raw materials from Iran and Venezuela, which contributed to the growth of oil prices to the highest levels since 2014. Separately, the agency warned earlier this month that high crude prices will put a brake on consumption. Data provider Genscape Inc. was said to report that inventories fell by about 475,000 barrels between May 18 and May 22 at the key pipeline hub in Cushing, Oklahoma. The commercial crude inventory remains in the lower half of the average range for this time of year.

Crude oil exports fell last week and refinery utilization rose ahead of the Memorial Day weekend. Although it slumped slightly lower on Wednesday, that was the highest price for WTI crude since November 2014.

Oil prices fell on Thursday on expectations that OPEC members will step up production in the face of worries over supply from both Venezuela and Iran.

Oil prices are slumping as producers in Saudi Arabia and Russian Federation vow to meet the demand predicted from a possible shortage in flow from Venezuela and Iran.

At 0509 GMT, July WTI crude oil is trading $71.91, down $0.29 or -0.39% and July Brent crude oil is at $79.06, down $0.51 or -0.64%.

Saudi Arabia and other major OPEC producers could in theory add more supply, but have yet to do so. Distillate product supplied averaged about 4.2 million barrels a day for the past four weeks, down by 1.9% compared with the same period a year ago.

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