Brent oil prices fell on Tuesday while US West Texas Intermediate rose slightly after the US government asked Saudi Arabia and other major crude exporters to boost their production to cool rising gas prices. Anadarko photo.
Brent oil prices hit one-month low Tuesday
Oil prices were mixed in trading on Tuesday after reports that the Trump administration has asked Saudi Arabia and other major crude exporters to boost their crude output after gas prices in the United States rose to their highest in over three years.
By 1:47 p.m., EDT, benchmark Brent crude futures dipped 46 cents to $74.83. Earlier in the session, Brent crude future fell to $73.81, the lowest since May 8. US West Texas Intermediate futures rose 61 cents to $65.36/barrel, recovering from a session low of $64.22, the lowest since April 10.
The Canadian Crude Index rose 50 cents to $44.85.
According to media reports, OPEC and industry sources say the US government has unofficially asked Saudi Arabia as well as some other OPEC countries to boost their production. Bloomberg reports the US government is looking for the OPEC producers to increase production by about 1 million barrels per day (b/d).
The request is in response to rising gas prices in the United States and a complaint via Twitter from US President Donald Trump. “Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!”, tweeted Trump on April 20.
Global crude supply has rebalanced mostly due to the 2017 OPEC supply cuts, however, crude export and production decreases in Iran and Venezuela could result in a global oil supply shortage.
A social and economic crisis in Venezuela has impacted the country’s critical oil industry. In February, Venezuela pumped 1.548 million b/d which is drastically down from its 1997 high of over 3 million b/d. An S&P Global Platts source says Venezuela’s crude production is expected to fall by another 200,000 b/d in the coming months.
Last month, US President Donald Trump walked away from the Iran sanction relief deal and reimposed sanctions on Iran’s crude exports. As a result, Iran’s crude production could drop by 1 million b/d.
“Markets are forward-looking. The fact that Russia, Saudi Arabia and OPEC more broadly have started discussing raising output levels, you’ve got this pretty swift correction,” Tyler Richey, co-editor of the Sevens Report told Reuters.
Saudi Arabia and Russia have already discussed increasing OPEC pact participants’ crude output by about 1 million b/d to head off a looming supply shortage.
OPEC will meet in Vienna on June 22 to determine if the cartel and other non-OPEC producing countries, including Russia, should boost their output to compensate for Venezuela’s and Iran’s supply shortfalls.
“(The output decision) is going to be the main event of the month and the main input for the second half of the year, so any change in OPEC policy is a big event,” Petromatrix strategist Olivier Jakob told Reuters.
This year fund managers placed record bets on a higher oil prices, but the rise in US shale production as well as the prospect of higher OPEC output have led many investors to pare those positions.
Analysts polled by Reuters prior to US crude stock data being released expect inventories to fall for a second straight week.
The American Petroleum Institute will release its crude stock data on Tuesday afternoon while the US Energy Information Administration releases its data on Wednesday morning.