Oil steadies but threat of higher supply curbs gains

Oil steadies but threat of higher supply curbs gains

In its latest report released yesterday, OPEC said, however, that world oil demand growth in 2017, as projected by the Organisation remained unchanged at 1.65 mb/d, averaging 97.20 mb/d for the rest of this year.

Even if the supply gap, triggered by the return of U.S. sanctions on Iran and a major political crisis in Venezuela, is plugged, the oil market will likely remain vulnerable to disruption next year, the IEA warned.

Despite their proposal, U.S. President Donald Trump on Wednesday slammed OPEC for inflating prices.

Under one scenario weighed by the IEA, output from Venezuela and Iran by the end of 2019 could be 1.5 million barrels per day lower than it is today.

In April, Saudi Energy Minister Khaled al-Faleh said the global market has the capacity to absorb higher oil prices, according to Agence France-Presse - a remark that drew Trump's wrath. In late May, that decline reversed and the price oil declined as Russian Federation and Saudi Arabia indicated a willingness to accept lower prices.

The Organization of Petroleum Exporting Countries will meet next week and discuss whether to restore production it halted past year.

The surge comes at a time the USA and other consumers are pressuring Saudi Arabia to lift the output cuts at their June 22 meeting, in Vienna.

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Saudi Arabia says it is ready to temper prices by raising supply. The contract climbed 28 cents to $66.64 on Wednesday.

Oil ministry officials also said that with firm oil prices, a rising import bill, $450 billion of external debt, including oil-related debt, govternment's hands are tied and there is no scope for fuel price reduction.

"Higher production in Saudi Arabia, Algeria and Iraq was partially offset by decreased crude oil production, mainly in Nigeria, Venezuela and Libya", the oil cartel said.

The U.S. has lobbied Saudi Arabia and other members, arguing they need to raise output by 1 million barrels a day to keep prices in check, people told Bloomberg News earlier this month.

OPEC said, "Recent developments in the oil market have led to pronounced uncertainty about the second half of the year". "As has been the case for some years, China and India together will contribute almost 50 per cent of global oil demand", the agency had said in a report. Trump tweeted on April 20.

Sources close to the matter said a number of options are being looked at, including an increase of around 1 million barrels per day and, should prices fall, making no decision. The Joint Ministerial Monitoring Committee (JMMC) representing the 24 Opec and non-Opec producing countries participating in the voluntary production adjustments will next meet in Vienna on June 21. They have shown discipline in limiting production since the start of previous year, helping push up the benchmark price of worldwide crude.

In a welcome move, India and China are working on combining their forces to counter Opec's ability to dictate crude oil prices.

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