Brent crude futures hit their lowest in close to a month on Tuesday following a report that the US government had asked Saudi Arabia and other major exporters to increase oil output.
The international benchmark was down $1.09 by 1040 GMT at $74.20 a barrel, its lowest since May 8. US West Texas Intermediate crude fell 21 cents to $64.54.
The US government has asked Saudi Arabia and some other Opec producers to increase oil production by about 1 million barrels per day (bpd), Bloomberg reported on Tuesday, citing people familiar with the matter.
The request comes after US retail gasoline prices surged to their highest in more than three years and President Donald Trump publicly complained about Opec policy and rising oil prices.
It also follows Washington’s decision to reimpose sanctions on Iran’s crude exports that had previously displaced about 1 million bpd from global markets, the report said.
“With the midterm elections coming up, obviously he wants lower gasoline prices, but at the same time, he’s alienating himself from the rest of the world … so is anybody, apart from Saudi Arabia, maybe going to listen, or comply or cooperate?” PVM Oil Associates strategist Tamas Varga said.
“This seems to be an intervention in Opec’s supply policy …(the US) walks away from the Iran (nuclear) deal, which pushes up oil prices and less than a month later, demands producers raise production … this story is Trump-esque.” The Organization of the Petroleum Exporting Countries meets in Vienna on June 22 to decide whether the group and non-Opec producers, including Russia, should raise output to make up for any supply shortfall from Iran and Venezuela.
Saudi Arabia and Russia were already discussing raising Opec and non-Opec oil output by around 1 million bpd, sources familiar with the matter said on May 25.
Global oil supply has tightened with the Opec-led production cuts that began in early 2017.
“[The output decision] is going to be the main event of the month and the main input for the second half of the year, so any change in Opec policy is a big event,” Petromatrix strategist Olivier Jakob said.
Fund managers this year racked up a record bet on a continued rise in oil prices, but the sustained increase in US shale production and now the prospect of higher Opec supply have prompted many investors to pare those positions.
Source: Gulf News