Published: Sun, June 10, 2018
Money | By Armando Alvarado

Oil prices rise on Venezuelan supply troubles, but U.S. output surges

Oil prices rise on Venezuelan supply troubles, but U.S. output surges

Crude oil prices fall U.S. data showed a surprise build in crude and gasoline stockpiles; U.S. WTI -1.2% at $64.74/bbl, Brent -0.6% at $74.89/bbl. For the week, Brent fell 0.5 percent, while USA crude slipped 0.3 percent.

Venezuela has the world's biggest oil reserves and is a key supplier to American fuel markets but its output has been hampered by inadequate investment, mismanagement and a confrontation with the United States that has led to sanctions.

USA crude output hit a record of 10.8 million barrels a day in the week, according to the EIA's weekly report. While production in the US has skyrocketed, pipeline capacity has failed to keep up allowing pockets of oil gluts to generate headwinds for WTI. It touched a low of $73.81, its lowest since May 8.

The futures contracts dipped after the forecast was issued, and then pared losses.

The Saudi statement in May threatened to undermine a deal between OPEC and its allies led by Russian Federation to curb output by about 1.8 million barrels per day (bpd), starting from January 2017, to reduce a supply glut and boost prices.

OPEC exports increased to 578 billion dollars previous year from 451,800 million dollars in 2016, stressed the group's Annual Bulletin of Statistics 2018. United Kingdom drivers should feel some reprieve when the late-May drop in underlying crude prices filters through, but they, along with the rest of the market, will remain at the mercy of U.S. and Opec politics. Treasury Secretary Steve Mnuchin told reporters last month the us held discussions with "various parties" to pump more to offset a drop in Iranian exports due to renewed USA sanctions.

Surging U.S. production has helped widen WTI's discount to Brent to more than $10 per barrel CL-LCO1=R.

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USA investment bank Jefferies said the crude market is tight and spare capacity could dwindle to 2% of demand in the second half of 2018, its lowest level since at least 1984.

Petrochemical giant Saudi Aramco has increased the crude oil prices for Asian consumers to the highest in four years, looking at the strong demand and that seems to be adding premium to those prices.

Riyadh, Tehran's arch rival, has always been a close Washington ally, but direct pressure on a member of Organization of the Petroleum Exporting Countries (OPEC) over oil policies is rare.

OPEC and Russian Federation will meet on June 22 to decide whether to increase production following a fall in global inventories as world demand outstrips supply.

In a rare request, the USA government has quietly asked Saudi Arabia and some other Opec members to boost crude production after retail gasoline prices surged to their highest in more than three years and President Donald Trump publicly complained about the group's policy and rising oil prices on Twitter.

Outside OPEC, however, there were ongoing signs of rising output.

"I think it is going to be very choppy", he said.

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