Oil prices tumble on surprise build in USA crude stockpiles

Ivan Schwartz
June 10, 2018

Also said to have affected Wednesday's market activity was Dharmendra Pradhan, oil minister for India, who told media that "For the first time, the Saudi oil minister called us and said "we are revisiting our policy on oil output cuts".

Earlier on Friday, Iran criticized a USA request that Saudi Arabia pump more oil to cover a drop in Iranian exports and predicted OPEC would not heed the appeal. The American Petroleum Institute was said to report nationwide crude inventories declined by over 2 million barrels last week.

"Markets are forward-looking. The fact that Russia, Saudi Arabia and OPEC more broadly have started discussing raising output levels, you've got this pretty swift correction", said Tyler Richey, co-editor of the Sevens Report in Jupiter, Florida. The surplus in gasoline comes amid higher year-over-year consumer fuel prices and a long US holiday weekend. There have been reports that Saudi Arabia and Russian Federation will loosen production quotas and may pump up to an additional 1 million barrels a day now that the world's supply of oil has reached essential parity with world demand. The agreement began to be applied in January 2017 and will be valid until the end of this year.

Iran would benefit less than Saudi Arabia from an increase in supplies if it can not raise output, as well as receive a lower price for existing production.

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But Opec is signalling it could increase output, and the danger of a global trade war has just bubbled up again as a threat to demand. Production in 2016 totaled 75.48 million barrels a day.

This comment followed an unofficial request from the United States asking OPEC's de-facto leader Saudi Arabia to boost output. "We always have conversations with the USA 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. PVM Oil Associates strategist Tamas Varga said, Reuters reported. OPEC production declined by 926,000 barrels a day (2.8% year over year).

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. While oil is still in technical price trouble in the short-term the correction should soon be over. "Consumers are very important for us".

Other reports by GizPress

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