Oil prices drop on potential increase in OPEC output

Russian energy Minister Alexander Novak said that the parties to the agreement OPEC+ can go for the mild reduction commitments to limit oil production, if at the Ministerial meeting in June will be the understanding the balancing market. Brent crude futures jumped to a new four-year high of $80 a barrel last week as new United States sanctions on Iran and Venezuela, which would reduce supply further, appeared imminent.

Benchmark Brent LCOc1 futures were down 59 cents at $79.21 a barrel by 0922 GMT, while USA crude futures CLc1 eased 41 cents to $71.43 a barrel.

Oil cartel Opec might decide to raise oil output as soon as June due to worry over Iranian and Venezuelan supply and after Washington raised concerns the oil rally was going too far, Opec and oil industry sources familiar with the discussions told Reuters. In post-settlement trade, the benchmark hit a fresh 3-1/2 year high at 72.59.

"The lack of a currency response means that Canadian consumers are feeling the full impact of higher oil prices", he said.

Rising supply in the United States, where shale production is forecast to hit a record high in June, has limited the upward move in prices.

Week over week, US crude oil exports fell by 818,000 barrels a day, and USA production rose by 2,000 barrels a day to 10.73 million.

Additionally, senator Lisa Murkowski, a republican who chairs the U.S. Energy Committee, said that while "OPEC's supply restrictions are higher and should be better.I'm stunned to hear my colleagues encouraging more production from the likes of Iran and Saudi Arabia, rather than right here in America".

A freefall in crude production in Venezuela is also impacting oil prices as it is influencing the pace of stock reduction due to which the oil price now "is somewhat above what we forecast", Novak said. At the auction the previous day, the price decreased by $1,01 (1,27%) and has made on closing of $78,79 per barrel. "Prices will continue to recover toward the end of the year as strong global growth, especially in China, will shore up demand for industrial metals", their survey said.

Non-OPEC oil producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan agreed to reduce output by 558,000 barrels per day starting from January 1, 2017.

In stocks, London and Frankfurt indices finished the week slightly higher, while Paris was essentially flat at the close as investors hesitated amid the confusing series of reports on geopolitics.

  • Anthony Vega