OPEC sees uncertain outlook for oil market

Lloyd Doyle
June 12, 2018

The market hit its low for the session and turned higher after Iraq's oil minister said producers should not be influenced by pressure to pump more oil.

The Organization of the Petroleum Exporting Countries (OPEC) released its monthly report on Tuesday, and the group cited a high degree of uncertainty hanging over the global oil market.

OPEC kept its projected world oil demand growth unchanged for 2018, but offered a slight upward revision to its total non-OPEC supply by 130,000 bpd to 59.75 million bpd.

OPEC, together with some non-OPEC producers including Russian Federation started withholding output in 2017 to end a global supply overhang and prop up prices.

Non-OPEC suppliers include the United States where producers have returned to the business in droves, encouraged by rising prices. But markets are anxious by falling supply from Venezuela and the potential of lower exports from Iran.

Oil prices fell yesterday, pulled down by rising Russian production and the highest USA drilling activity in more than three years.

Drawdowns "in crude oil inventories, healthy oil demand and geo-political developments have supported this rising trend", OPEC said. On Tuesday, Brent oil stood at almost $76. This is 143,000 bpd above the country's quota under the OPEC+ production cut deal, and only about 100,000 bpd below the record-breaking production rate in November 2016, which Russian Federation took as basis for its cuts.

OPEC secretary general Mohammad Barkindo in April praised the agreement as a "great success".

Earlier in the month, the market sold off sharply as investors priced in the possibility of increased production from Saudi Arabia, Russia and other major producers.

"Markets are braced for the most fractious conference as OPEC members look fundamentally divided", said Phillip Futures analyst Benjamin Lu.

We continue to expect a two-sided trade as investors prepare for the OPEC meeting in Vienna on June 22. On Monday, Iraq suggested it would not back a plan to raise production.

Iran's share of OPEC production increased slightly last month, possibly a sign that the country's crude exports have not yet been affected by the U.S. decision to ditch a landmark global nuclear accord with Tehran and re-impose damaging sanctions.

Other reports by Iphone Fresh

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