Oil prices fell on Monday as investors considered rising US crude output as well as the possibility that OPEC is considering increasing its supply to compensate for declining Venezuelan production and the Trump administration’s decision to slap sanctions on Iranian crude exports.  Apache photo.

Oil prices down over 1 per cent Monday

Oil prices dropped over one per cent on Monday on US government data showing an increase in US crude production to record highs as well as the possibility that OPEC members could decide to increase their output.

By 12:32 p.m., EDT, benchmark Brent crude was down $1.03 to $75.76/barrel, recovering slightly from a session low of $75.53.  US West Texas Intermediate dipped 84 cents to $64.97/barrel.  The Canadian Crude Index rose 6.69 per cent, or $2.74 to $43.08.

According to Reuters, oil prices hit their lowest mark since April 10, breaking below technical support levels as investors kept selling due to global trade tensions and rising output worldwide.

“A sea of red is washing over the energy complex as rising U.S. production coupled with a looming relaxation in OPEC-led cuts sends bulls scurrying for the exits,” Stephen Brennock, analyst at PVM Oil Associates told Reuters.

Data from the US Energy Information Administration released last week showed crude production in the United States had risen to a monthly record high of 10.47 million barrels per day (b/d).

As well, Baker Hughes reported in its weekly rig count that drillers in the US added two rigs in the week ending June 1, bringing the total to 861, the highest since March 2015.  This is the eighth week of increases in the past nine weeks.

The state news agency in Kuwait, KUNA, reported on Sunday that over the weekend, Arab oil ministers agreed that OPEC producers along with other big oil producing countries need to continue to cooperate to balance global supply.

The announcement came after OPEC ministers from Saudi Arabia, the United Arab Emirates, Kuwait and Algeria as well as non-OPEC member Oman, met unofficially in Kuwait on Saturday.

The cartel is scheduled to meet in Vienna on June 22 to set oil policy.  At that time, it is expected OPEC members along with Russia and other supply pact participants, will agree to boost output.

The move is expected to cool the crude market impacted by sharp declines in Venezuela’s production as well as the impact of the Trump administration’s decision to slap sanctions on Iran’s oil exports.

Russia’s largest oil producer, Rosneft, says it will be able to increase its output by 70,000 b/d in just two days if the OPEC production limits are lifted, Reuters reports Renaissance Capital wrote in a client note.

Last week, bullish bets on US crude futures and options were cut by hedge funds and other money managers, according to data released on Friday.  Slumping oil prices drove the shift out of crude futures.