Oil prices rose on Thursday as concerns about plummeting production in Venezuela combined with hints that OPEC may not roll back its production cuts weighed on investors.  Repsol photo.

Brent oil prices up over 2 per cent

Oil prices rose over $1/barrel on Thursday after data showed the crisis in Venezuela has significantly hampered crude exports, and some OPEC members pushed back against Saudi Arabia’s plan to soften the cartel’s supply cut agreement.

By 3:53 p.m., EDT, benchmark Brent was up 2.45 per cent or $1.85 to $77.21/barrel and US West Texas Intermediate rose 1.95 per cent or $1.26 to $65.99/barrel.  The Canadian Crude Index climbed 1.51 per cent or 65 cents to $43.71.

After reports of a fire at Citgo Petroleum’s Corpus Christi, Texas refinery, futures contracts for gasoline and ultra-low sulphur diesel also rose.

According to Reuters, Algeria’s oil minister opposes Saudi Arabia’s position that OPEC’s production should rise, arguing instead that OPEC should focus on balancing the oil market.

Algeria’s Energy Minister Mustapha Guitouni said “What matters to us is that there is a balance between supply and demand to ensure the stability of the oil markets”, while speaking on state radio.

According to Reuters, on Wednesday, Iraq said a boost in production was not on the table.

“They’re all seeming to push back on the Saudis’ push to raise production,” John Kilduff, a partner at Again Capital Management told Reuters. “With this more than 10 per cent (price) fall, they may reconsider things as we come closer to the meeting.”

Another factor boosting oil prices is Venezuela’s plunging crude production.  The country is mired in social and economic crises and may face more sanctions from the Trump administration.

Currently, Venezuela is almost one month behind delivering crude to its customers from the country’s main export terminals, according to shipping data.

These shipping delays and declines in production could breach PDVSA’s, the Venezuelan state-owned oil company, supply contracts.  At this time, tankers sitting off the main oil port are waiting to load over 24 million barrels of crude.  This is the same amount of oil that PDVSA shipped in April.

As well, Angola reports declining production at its aging fields.

The upheaval in Venezuela coupled with OPEC’s upcoming announcement on its supply cut agreement, means “oil traders could be in for an increased bout of volatility”, Jasper Lawler, head of research at London Capital Group told Reuters

OPEC will meet with other pact participants, including Russia, in Vienna on June 22-23 to discuss its supply policy.

“Venezuela’s worsening economic crisis, together with ongoing geopolitical tensions in the Middle East, will remain supportive of oil prices,” Abhishek Kumar, Interfax Energy senior analyst told Reuters. “Nevertheless, growing prospects for an increase in production from the ‘OPEC Plus’ and rising oil output from the US will cap price gains.”

Data from the US Energy Information Administration showed US crude production is nearing 11 million barrels per day (b/d).  Only Russia produces more crude than the United States.

As a result of these increases in production, the discount between Brent crude futures to WTI rose to over $11/barrel.