Markets

Oil heads towards $100 on mounting supply concerns

Oil heads towards $100 on mounting supply concerns

While Russia and OPEC benefit from higher oil prices, up nearly 20% since the end of past year, their voluntary output cuts have opened the door to other producers to ramp up production and gain market share.

Brent futures fell 37 cents, or almost 0.5 percent, to $79.20 a barrel by 0636 GMT, after climbing 35 cents on Tuesday.

Oil prices were mixed Wednesday as USA data showed big increases in crude and fuel stockpiles and as investors weighed whether the Organization of the Petroleum Exporting Countries could ramp up crude production.

Earlier this month oil prices skyrocketed, surpassing US$80 a barrel for the first time since 2014, after the USA withdrew from the Iran nuclear deal. While rates of global production have slowly risen, it's unlikely that oil producers will be able to keep up with demand thanks to restrained production in both the United States and Saudi Arabia.

Venezuela's large export decline and worldwide condemnation of President Nicolas Maduro's re-election this week, which has started triggering new sanctions, is creating tension in the global oil market.

"The spectre of US oil sanctions on the embattled Latin American producer now looms large as Washington strives to tighten the financial noose", PVM Oil Associates strategist Stephen Brennock said in a note.

Meanwhile, commercial US crude inventories rose C-STK-T-EIA by 5.8 million barrels in the week to May 18, beating analyst expectations for a drop of 1.6 million barrels, the Energy Information Administration (EIA) said on Wednesday.

U.S. West Texas Intermediate (WTI) crude futures eased 2 cents to $72.18 a barrel, having climbed on Tuesday to $72.83 a barrel, the highest since November 2014.

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"OPEC and Russian Federation may consider easing their production cuts before, or no later than, their joint meeting", Ole Hansen, head of commodity strategy at Saxo Bank A/S, said in a note to clients.

Crude oil prices are trading around multiyear highs.

At the Multi Commodity Exchange, crude oil for delivery in June fell by Rs 15, or 0.31 per cent, to Rs 4,898 per barrel in a business turnover of 3,452 lots.

"It is the intent of all producers to ensure that the oil market remains healthy, and if that means adjusting our policy in June, we are certainly prepared to do it", Al-Falih said.

Gasoline demand this weekend should come in at or near records, The U.S. economy is soaring and consumer incomes are at the highest levels in years.

Saudi Arabia and other major OPEC producers could in theory add more supply, but have yet to do so.

Oil fell on Wednesday, under pressure from a potential increase in OPEC crude output to cool the market's recent rally and cover any shortfalls in supply from Iran and Venezuela.


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