Oil prices fell on Monday after OPEC announced it will increase its production by 1 million barrels per day (b/d) and US equity markets slipped on fears that the trade war between the US and China will escalate.  Equinor photo.

Oil prices down Monday

Oil prices fell on Monday over mounting concerns about increased OPEC production as well as a drop in US equity markets due to an escalating trade war between the United States and China.

By 3:53 p.m., EDT, benchmark Brent crude futures were down 58 cents to $74.74 and US WTI fell 40 cents to $68.18/barrel.  The Canadian Crude Index jumped by 5.71 per cent, up $2.41 to $44.58.

A power outage late last week at the Canadian oil sands Syncrude project stopped production at the northern Alberta mine.  The interruption at the 360,000 barrel per day (b/d) facility could last through July, according to the company.

“The expectation that we’ll see more crude out of OPEC and that supplies in the U.S. will be tight because of the Syncrude outage… is going to keep the market on edge,” Phil Flynn, analyst at Price Futures Group told Reuters.

The Syncrude shutdown will likely ease pipeline constraints that have boosted the discount in price between Western Canadian Select bitumen blend oil and WTI.  It will also limit the amount of Canadian crude arriving at the Cushing, Oklahoma, delivery point of US futures contracts.

On Friday, OPEC announced it will boost its supply of crude to help alleviate an impending supply shortage.  After months of over delivering on pledges to cut crude production as part of the OPEC supply cut agreement, participants agreed to boost global supply by hitting 100 per cent compliance with the pact.

An economic and social crisis as well as a crippling recession have severely impacted Venezuela’s crude production and disruptions in Angola have also affected OPEC’s output.

The head of Saudi Aramco said the kingdom’s state-run oil company could increase its capacity by 2 million b/d should the interruption in supplies worsen.

Analysts with Goldman Sachs, however, believe the crude supply shortages will continue.

“Saturday’s OPEC+ press conference provided more clarity on the decision to increase production, with guidance for a full 1 million b/d ramp-up in 2H18,” Reuters reports Goldman Sachs said in a note on Sunday.

“This is a larger increase than presented Friday although the goal remains to stabilize inventories, not generate a surplus.”

A drop on Wall Street also pressured oil prices and all three major stock indexes were down as trade tensions between the US and China escalated.