Oil falls on OPEC's announced output rise, but markets to remain tight

Oil falls on OPEC's announced output rise, but markets to remain tight

In a related development, Russia's oil minister has dismissed the suggestion that public pressure from the U.S. played a role in his country's decision to push for increase in oil supplies to the global market.

Technically, Opec and its partners will strive to reach 100 percent compliance with production quotas adopted about 18 months ago, according to a communique published after the meeting last week. On Friday, Brent crude oil futures - the global benchmark for crude oil and petroleum products - jumped more than 2 per cent.

He also tweeted on June 13 that "Oil prices are too high; OPEC is at it again".

USA light crude retreated after an early rise to trade down 41 cents to $68.17 a barrel.

Saudi Energy Minister Khalid al-Falih said OPEC and non-OPEC combined would pump roughly an extra 1 million barrels per day (bpd) in coming months, equal to 1 percent of global supply.

The Opec deal, which was reached after a last-minute compromise with Iran, is a victory for Saudi Arabia and Russian Federation that initially proposed an increase. Nevertheless, consumer's voice led OPEC to boost output, they said.

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"We've adjusted our model to reflect the quota changes, extended Venezuelan declines to 800,000 b/d by YE19 (from 1.4 million b/d currently), and assumed a ~0.5 million b/d reduction in Iranian exports in 2019", Featherston said. We believe that the investors have over-reacted to the move, which has resulted in a rise in oil prices.

This would translate into 900,000 barrels per day (bpd) incremental production, which is significantly lower than the initial expectation of 1.5 million bpd. Meanwhile, every minister seemed to have his own interpretation of what the hike meant for the market. This follows earlier reports of a one million barrel production increase which was strongly opposed by Iran.

Losses in USA crude prices were limited by the likelihood that an outage at Syncrude Canada's 360,000 barrel per day oil sands facility would last through July.

The group's output has been below targeted cuts largely because of unplanned disruptions in places such as Venezuela and Angola.

Meanwhile, the biggest United States shale region will have to shut wells within four months because there aren't enough pipelines to get the oil to customers, according to Scott Sheffield, the chairman of Pioneer Natural Resources Co.

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