Oil output could return to Oct'16 level, says Russia's Novak
27 May, 2018, 17:21 | Author: Billie Castillo
The potential for an OPEC policy change, following U.S. President Donald Trump's tweet complaining about high prices, scrambled the outlook for oil markets and undercut the stock prices of producers. Brent crude has been flirting with the kingdom's desired price of about $80 a barrel for most of this month, and the proposal to boost supplies suggests it doesn't want to see it go much higher.
Crude oil West Texas Intermediate (WTI) melted down 4.24% on Friday (trading at around 67.88) as Saudi Arabia and Russian Federation are considering ramping up production in order to compensate for the sharp decrease output from Venezuela and potentially also Iran which is at risk of sanctions from the United States.
The minister added that the gradual increase in the oil production within the framework of the OPEC-non-OPEC deal might begin in the third quarter of 2018.
Oil fell sharply following the comments, with Brent crude losing as much as 2.5 per cent to $76.84 a barrel as of 12:02 p.m.in London.
"The tweet moved the Saudis", said Bob McNally, founder of consultant Rapidan Energy Group in Washington and a former White House oil official.
While Russia and OPEC benefit from higher oil prices, which have risen by nearly 20 percent since the end of previous year, their voluntary output cuts have opened the door to other producers to ramp up output and gain market share.
He said he will meet with OPEC ministers in June to discussion a production increase, which he said was likely and - just like earlier production cuts - should be "proportionate, for the sake of fairness" so that all producers can benefit from the increase.
The drop erased a three-week rally that was based in large part on geopolitical worries about unrest in Venezuela and USA calls to curtail purchases of Iranian oil.
President Trump was the first to voice concern about too-high prices and, not long after, India's oil minister followed with a complaint about unreasonably high prices. Falih, the de facto head of OPEC, warned that consumer anxiety "is a concern to us".
OPEC and Russian Federation have been keeping output below capacity since November 2016.
Also making headlines over the weekend was an announcement that U.S. Commerce Secretary Wilbur Ross will be visiting China from June 2 to June 4, in another effort to ease the trade disputes between the U.S. and China.
The abrupt reversal interrupted a surge in the American benchmark from less than $50 a barrel last fall to over $70, largely because of the collapse of Venezuelan oil production, the withdrawal of the United States from the Iran nuclear deal and stronger global demand for energy. "The idea would be to bring compliance back down to 100 percent, which would mean allowing members to produce more to offset Venezuela's declines".
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