Venezuela Urges OPEC to Unite Against Sanctions

Marco Green
June 8, 2018

Iran and Venezuela are now the two key oil supply concerns globally that supported the oil price rally in recent weeks, before Saudi Arabia and Russian Federation hinted at discussions that they were considering reversing some of the cuts to offset production losses and "ease market and consumer anxiety".

Brent crude futures settled up $1.96 a barrel, or 2.6 percent at $77.32. Fuel inventories also rose.

According to the latest Reuters data, Venezuela is lagging by almost a month in shipping crude to customers from its main oil export port, in the wake of falling output levels amid the financial and economic crisis. Rising production has prompted selling since global benchmark Brent LCOc1 climbed above $80 a barrel last month.

US West Texas Intermediate (WTI) crude futures were up 19 cents, or 0.3 per cent, at $66.14 a barrel.

US crude output hit a record of 10.8 million barrels a day in the week, according to the EIA's weekly report.

Reuters reported on May 25 that the producers were considering a supply increase of 1 million barrels per day, with a final decision to be made at the June meeting in Vienna.

Iran criticized a US request that Saudi Arabia pump more oil to cover a drop in Iranian exports and predicted OPEC would not heed the appeal, setting the stage for a tough meeting of the producer group later this month.

OPEC and Russian Federation meet on June 22/23 to discuss production policy. What a coincidence! Still, in the big picture, 1 million barrels will help but won't solve the problem. Gains grew when Algeria's oil minister indicated OPEC would focus on balancing the market rather than on rolling back production caps.

"The oil price is being driven by OPEC and views on how much and how quickly "OPEC plus" will raise output", Energy Aspects analyst Virendra Chauhan said.

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

Three sources have told Reuters that Venezuelan state firm PDVSA is considering declaring force majeure on some exports, amid plummeting output and tanker bottlenecks at ports.

US sanctions on Iran also threaten to reduce oil exports from that OPEC producer. "We always have conversations with the United States about the stability of the oil market", a senior Saudi official told Reuters, though he did not confirm whether the aforementioned phone call took place.

Other reports by Click Lancashire

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