Oil prices rise amid Venezuela export concerns

Gladys Abbott
June 10, 2018

"OPEC supply changes remain the biggest uncertainties in the market", said Xi Jianrui, senior crude analyst with oil consultancy JLC said.

Saudi Arabia, Iran's arch rival, has always been a close U.S. ally, but direct pressure on any Organization of the Petroleum Exporting Countries (OPEC) member is rare.

United States oil prices edged up in early Asian trade on Wednesday to move away from lows hit in the previous session, buoyed after industry data showed a decline in USA crude inventories. The market is very different from just a few months ago, now that Opec and its partners have reached their goal of bringing OECD stocks back to the five-year average and crude prices are at a 42-month high.

Iran's Kazempour predicted OPEC would not heed the USA request and said oil prices would jump in response to Washington's sanctions on Iran and Venezuela, as they did during a previous round of US sanctions against Iran.

US crude oil production C-OUT-T-EIA hit another record last week at 10.8 million barrels per day (bpd). Global reserves decreased by 0.4% year over year in 2017 and OPEC reserves dipped 0.3%, mostly due to lower production from Venezuela, the current world leader with reserves of almost 303 billion barrels.

Oil prices on Thursday rose on the back of plunging exports by OPEC-member Venezuela, recovering some ground lost in the previous session, although another surge in US production still weighed on markets, traders said, Reuters reports.

In 2015, Tehran refused to sign up to OPEC policies, saying it needed to hike output due to the easing of sanctions after a nuclear accord with world powers.

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The poster maintained high production levels between 2014 and 2016 to protect its market share, a period in which the value of oil shipments declined.

However, Saudi Arabia and Russian Federation have said cuts could be eased after receiving calls from consumers including the United States, China and India to support global demand.

Opec and Russian Federation meet on 22 June to discuss production policy. It's mostly because of a rise in EIA oil inventories and record weekly domestic production. "We always have conversations with the U.S. about the stability of the oil market", a senior Saudi official told Reuters, though he did not confirm whether the aforementioned phone call took place.

OPEC exports increased to 578 billion dollars past year from 451,800 million dollars in 2016, stressed the group's Annual Bulletin of Statistics 2018.

The sources say Riyadh's shift in stance was prompted by pressure by Washington and other consuming countries but does not reflect concern in Saudi Arabia that there is a supply deficit. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High!

"The thinking before was to continue with the OPEC deal until the end of the year", a fourth OPEC source said. "Consumers are very important for us".

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