Markets

Bearish oil seen ahead of OPEC meeting

Bearish oil seen ahead of OPEC meeting

US sanctions will contribute to Iran and Venezuela potentially losing nearly 30 percent of their oil output next year, requiring extra supplies from the group's Gulf members, the International Energy Agency said last week.

Iran, however, said OPEC was unlikely to reach a deal on oil output this week, setting the stage for a clash with Saudi Arabia and Russian Federation, which are pushing to raise production steeply from July to meet growing global demand.

Oil's market report for the month of June by EIA and Opec showing a stable demand growth while Non-Opec supply growth increased a bit.

Smith says US oil production is poised to hit 12 million barrels a day next year.

"There is an element of self-preservation in seeking to do this, as while most oil producers prefer higher prices they will also want to avoid a scenario where prices reach a level where demand drops off sharply, thus triggering a global slowdown, as well as accelerating the push for renewable (energy)", he said.

As the Organization of Petroleum Exporting Countries (OPEC) prepares to meet later this week in Vienna, tension is rising among some of the cartel's biggest members on what is said to be one of OPEC's biggest decisions since its establishment.

In the meantime, the storage capacity at Ras Lanuf port had been cut by 4,00,000 barrels after a second crude oil tank was set on fire amid fighting between rival factions for control of two key export terminals in Libya. Venezuela experiences severe production outage, and already lost 350,000 barrels / day this year with the decline accelerating.

"Opec is fractured or fracturing", McKenna said, as Iran, Venezuela, and Iraq "seek to veto the production increase".

Oil fell on Tuesday ahead of a possible increase in OPEC crude supply, and as an escalating trade dispute between the United States and China unleashed sharp sell-offs in many global markets.

Moreover, trade tensions between China and the United States increased as the former said it would levy tariffs on some US goods, including crude and gasoline, as a retaliation to President Donald Trump's $50 billion levy on Chinese imports. Yet any output increase agreement could be muted because other OPEC members including Iraq said last week that production cuts should be maintained because prices still need support.

For tanker owners, there is much at stake on 22 June when OPEC oil ministers gather in Vienna for what is likely to be a particularly bad-tempered meeting.

Roberts said Opec could boost production by about a million barrels day fairly rapidly, but several Opec countries have problems. Saudi Arabia's own data for May showed it increased its own output by 161,400 barrels a day.

Novak said that if a decision were taken this week to raise output, OPEC and its allies could meet again in September to review the impact and fine-tune production policy. It said China takes around 20% of all United States crude exports. OPEC output was last lower in April 2017 at 31.85 million b/d, the last month before West African producer Equatorial Guinea became its newest member.


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