Trump declares oil prices too high, blames OPEC

13 June, 2018, 19:52 | Author: Regina Silva

OPEC and Russian Federation decided together in 2016 to cut their supply in order to push prices up following a crash in prices induced by a global crude production glut.

The world's top crude producers are key partners in the OPEC+ deal, which is created to prop up oil prices by cutting global output.

Earlier in the session, Brent and USA crude had retreated on concerns about rising production in the United States and expectations that OPEC and other producers could relax voluntary output cuts.

"The United States shows by far the biggest gain (about 75 percent of the total across 2018 and 2019), but recently this expansion has not been without stress", the report said, referring to a gap in recent weeks between the U.S. and European oil futures contracts.

USA ally Saudi Arabia remains OPEC's most powerful member - with enough production capacity to manipulate global supplies. Crude inventories fell by 4.1 million barrels in the week to June 8, exceeding analysts' expectations for a decrease of 2.7 million barrels.

However, OPEC's president, Suhail Al Mazrouei, said on Tuesday that the USA has not asked the group to increase oil production in the wake of political unrest in oil-rich Venezuela and US sanctions on Iran. The Kingdom self-reported a production increase of 161,400 bpd to 10.030 million bpd, just below its ceiling of 10.058 million bpd.

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With output in Russian Federation rising back above 11 million bpd.in June and Saudi production climbing to more than 10 million bpd., supplies from all three top producers are increasing.

Total OECD commercial oil stocks-OPEC's current gauge of the oil market rebalancing-were 26 million barrels below the latest five-year average, as per preliminary data for April.

OPEC will meet on June 22-23 to discuss the potential of reducing its output cuts now that the market is more in balance. "Unofficial sources have said Russian Federation will propose to return production back to the October 2016 (level), i.e. removing the cap altogether over a period of three months". Its main concerns are higher oil prices and trade disruptions.

"We have looked at a scenario, not a forecast, showing that by the end of next year output from these two countries (Venezuela and Iran) could be 1.5 mb/d (million barrels per day) lower than it is today", it said in a report.

Fund manager Pierre Andurand at Andurand Capital is bullish.

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