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Oil steady on Venezuela exports, supply concerns

10 June 2018
Oil steady on Venezuela exports, supply concerns

Shortly before US President Donald Trump announced his decision to withdraw his country from the Iran nuclear deal, the White House reportedly attempted to ensure that Saudi Arabia would help maintain oil prices at a stable level.

Venezuela wrote to fellow OPEC members urging them to unite against US sanctions, echoing a similar letter from Iran, according to people with knowledge of the matter.

Crude oil prices drifted lower in early Wednesday trading amid signs of slumping USA consumer demand and lingering concerns about global trade disputes. Iran is the third-largest oil producer in OPEC after Saudi Arabia and Iraq.

China's May crude oil imports eased away from a record high hit the month before, customs data showed on Friday, with state-run refineries entering planned maintenance. The US has quietly pressed Saudi Arabia, the group's biggest member, and other producers to raise supply by about 1 million barrels a day, people familiar with the request said this month. 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.

Iran and Venezuela are now the two key oil supply concerns globally that supported the oil price rally in recent weeks, before Saudi Arabia and Russian Federation hinted at discussions that they were considering reversing some of the cuts to offset production losses and "ease market and consumer anxiety".

As speculation swirls over whether Opec and its allies will relax the caps at a meeting in Vienna later this month, Goldman Sachs Group Inc is still bullish on oil as it says stockpiles will continue to diminish this year.

May shipments were 39.05 million tonnes, or 9.2 million barrels per day.

OPEC meets to determine future production on June 22, 2018.

This comment followed an unofficial request from the United States asking OPEC's de-facto leader Saudi Arabia to boost output. When the USA announced it would reimpose sanctions on Iran in November, Ice Brent futures rose by $2.36/bl on the day. Oil prices lost considerable ground in a US-Chinese tit-for-tat on tariffs in April and now the focus is on Europe.

"OPEC will not accept such a humiliation". Demand growth has been such that the U.S. and Canada the main sources of new supply replacing lost output from Opec and its partners are now hitting physical export constraints.

Reuters reported in late May that OPEC and its allies could raise production by about 1 million bpd from July to address any potential oil shortages. While oil is still in technical price trouble in the short-term the correction should soon be over.