Oil Mixed on Possible OPEC Production Increase, Higher Crude Stockpiles

Latin America Energy, Oil and Gas, News and Information

Latin America Energy, Oil and Gas, News and Information

Money managers' reluctance to get behind the oil rally is finally paying off.

Yesterday US crude was above 70 dollars a barrel, today it's slipping to 68.48.

Whether it's the specter of sanctions on Iran, Venezuela's output plunge, or a momentum play on the back of the past year's 46-per-cent surge in Brent, there are now the equivalent of about 93 million barrels wagering on the global benchmark hitting $100 at some point in the next 12 months.

Various analysts have been wondering whether the Saudis will manage to pull off the listing of 5 percent of Aramco this year, amid speculation as to which foreign stock market the Saudis will choose, if any, and if the price of oil would be high enough to support a high valuation for the company.

Oil prices continued to drop on Thursday (May 24) amid speculation that OPEC will increase production to curb a shortage in Venezuela, and on newly reinstated USA sanctions against Iran.

Saudi Arabia and other major OPEC producers could in theory add more supply, but have yet to do so.

His Russian counterpart Alexander Novak said they had discussed whether they need to ease production limits. Both men said the size of the increase was still subject to negotiation.

Meanwhile, on Wednesday, Charles Schumer, U.S. senate democratic leader, held a news conference at a Washington Exxon station to criticize Trump for gasoline prices jumping 25 percent since the brash billionaire took office past year.

USA crude futures fell 36 cents, or 0.5%, to $71.84 a barrel, on the New York Mercantile Exchange. "The Democrats demanded Trump weigh in with OPEC to reverse crude price increases". "It makes flawless sense for the folks that are long to say, 'How much longer can this thing continue to grow?'"

But with so much uncertainty over how sanctions might affect Iranian supply, fund managers have cut their holdings of crude futures and options by more than 10% in the last seven weeks to the lowest level this year.

"The market kind of overextended itself, " Gene McGillian, manager of market research for Tradition Energy in Stamford, Connecticut, said by phone.

In stocks, London and Frankfurt indices finished the week slightly higher, while Paris was essentially flat at the close as investors hesitated amid the confusing series of reports on geopolitics.

A freefall in crude production in Venezuela is also impacting oil prices as it is influencing the pace of stock reduction due to which the oil price now "is somewhat above what we forecast", Novak said. OPEC agreed to slash the output by 1.2 million barrels per day from January 1.

The blend of oil from Alberta's oilsands is known as Western Canada Select and it, too, has risen to a more than three-year high, nearly touching $58 USA on Tuesday. That was a surprise increase compared with the 2-MMbbl decline predicted in a Bloomberg survey. Diesel inventories are seen down about 1.3 million barrels.

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