OPEC may raise oil output if prices increase, shortages mount

Cornelia Mascio
Aprile 14, 2019

The Organization of the Petroleum Exporting Countries (OPEC) on Thursday signaled that it may raise oil output from July if supply from Venezuela and Iran drops further - and although this message was conveyed to media via sources familiar with the matter, it was enough to cause traders to send crude prices plummeting. U.S. West Texas Intermediate (WTI) crude futures ended the session up 31 cents, or 0.5 percent, at $63.89 a barrel.

Siluanov said oil prices could drop to $40 per barrel or even less for up to one year.

Oil markets are tightening amid the increasing effectiveness of USA sanctions on Iran and Venezuela, the International Energy Agency said yesterday.

Oil prices fell on Thursday, pressured as US crude stockpiles surged to their highest levels in nearly 17 months amid record production and as economic concerns cast doubt over growth in demand for fuel.

"We believe global demand has another 10 million barrels bpd of growth, with over half from China", Bernstein Energy said in a note on Thursday.

Current oil demand stands around 100 million bpd.

"In 2019, non-OPEC production will grow 1.7 million b/d versus 2.8 million b/d previous year", it added.

OPEC could raise oil output from July if Venezuelan and Iranian supply drops further and prices keep rallying, because extending production cuts with Russian Federation and other allies could overtighten the market, sources familiar with the matter said.

The report also said that Angola was one of China's three largest oil suppliers, together with Saudi Arabia and Russian Federation, with shares of 11.3%, 15.2% and 14.6% in February, respectively. Demand is expected to grow by 1.4 percent per day.

In March, OPEC crude oil production tumbled by 550,000 b/d with losses in Venezuela, together with lower output from Saudi Arabia and Iraq.

The rig count fell for the past four months as independent exploration and production companies cut spending on new drilling to focus on earnings growth instead of increased output.

OPEC production meanwhile fell by 0.55 mbd in March to 30.13 mbd - a four-year low - largely due to cuts in Saudi Arabia and crisis-hit Venezuela, the IEA said. Though the rig count itself is a lagging indicator, with additional production showing up with a five-to-six-week latency after new drilling is reported, it is an important gauge to market participants trying to determine if USA output is surging again.

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