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Oil falls on possibility that Opec will ease output cut
June 23 2018, 04:36 | Alonzo Simpson
MID-DAY: Oil continues to slump on reports of higher production; North Korea US tensions weight Wall Street
While Russia and OPEC benefit from higher oil prices, up nearly 20% since the end of a year ago, their voluntary output cuts have opened the door to other producers to ramp up production and gain market share. Brent, the global benchmark, rose 23 cents, or 0.29%, to $79.80 a barrel, on ICE Futures Europe, a fresh three-and-a-half year high.
Crude oil prices are under pressures as the Organization of the Petroleum Exporting Countries (OPEC) and NON-OPEC start laying the groundwork for a production increase and traders take profits ahead of the long holiday weekend.
It may be recalled that oil prices in March were pushed up by Saudi statements that OPEC and Russian led production curbs that were introduced in 2017 will need to be extended into 2019 in order to tighten the market.
Renewed U.S. sanctions following the cancellation of the Iran nuclear arms deal may also remove supply from the market.
Yesterday US crude was above 70 dollars a barrel, today it's slipping to 68.48.
U.S. West Texas Intermediate (WTI) crude futures eased 21 cents, or almost 0.3 percent, to $71.99 a barrel, having climbed on Tuesday to $72.83, also the highest since November 2014.
OPEC's third largest producer will be a key talking point when OPEC and 10 other oil producing countries meet in late June, after the U.S. chose to reimpose sanctions on Iran from November 5.
On May 22, the media said that OPEC at a meeting in June could decide to increase production.
As the daily chart below shows, the price remains within a rising channel in place since mid-April but a slide towards the channel support line seems possible after those two successive failed attempts to top $80, which is seen as an important level psychologically.
Later on May 23, official data on oil reserves in the country from the U.S. Energy Department will be published.
For Russia, stability is more important than a short-term significant growth in price, he said in the interview.
Based on the prospect of a shortfall in supply relative to demand, investors had driven their bets on a sustained rise in the price of oil to record highs earlier this year.
Prices have also been affected by rising geopolitical tensions that could dent global output just as demand is set to hit 100 million barrels per day in the final quarter of this year, according to the International Energy Agency.