Published: Thu, May 31, 2018
Money | By Bruce West

Oil slumps as Saudis and Russia say reviving output on the table

Oil slumps as Saudis and Russia say reviving output on the table

"The increase in crude prices comes on the back of an increase in customs duty on palmolein and crude oil in March this year and some of the impact will definitely have to be passed on to consumers", said Krishna Rao, category head of biscuits maker Parle Products.

The domestic oil industry in the United States has emerged in recent years a powerful swing force in the global petroleum economy.

Oil prices steadied on Wednesday after slipping prices as Saudi Arabia and Russian Federation say they will pump more crude oil in response to falling global crude inventories and rising consumer prices.

USA oil production has surged by more than 20 percent in the past two years to 10.73 million bpd.

Both are light, sweet crude oils although WTI is generally sweeter and lighter than its European counterpart. Prices on Monday lost $1.14 to $75.30.

Raising production would ease 17 months of strict supply curbs amid concerns that a price rally has gone too far, with oil having hit its highest since late 2014 at $80.50 a barrel this month.

New U.S. sanctions that may hit Iranian oil exports and plunging Venezuelan crude production have raised fears of global supply disruptions, sending prices above $80 a barrel in May.

China has also raised concerns about whether enough oil is being pumped, according to a Saudi statement issued after Energy Minister Falih called China's energy chief on Friday to discuss cooperation between their countries and to review the oil market.

Those constraints will take years to fix, but in the meantime one way to close those tempting spreads and nip such investments in the bud would be to dump some more oil in the non-US market commensurate with the amount coming out of the Permian. It is unknown if the decrease in world prices will be felt in Belize. But he said an agreement of a gradual easing was the likely outcome.

India being a large crude oil importer benefits from lower oil prices.

OPEC has been monitoring OECD inventories closely, and not just because its target in the cuts was the OECD inventory five-year average.

"But a decision will be made in June", he added, referring to meetings of OPEC and non-OPEC countries in Vienna on June 22-23.

The upshot: Oil has played havoc with our currency market with the USD/INR pair plummeting all the way to 68 levels since April 2018.

Meanwhile, surging USA crude production also showed no sign of abating as drillers continue to expand their search for new oil fields to exploit.

The timing of the new regulation will coincide with the effect on supply from the underinvestment during the oil price crash and the strength in demand, suggesting that the "era of "lower for longer" oil prices is dead", Energy Aspects' Sen and Yasser Elguindi wrote in a commentary in the Financial Times this week.

The global sulfur limit on fuel oil will be set at 0.5% m/m (mass/mass) in 2020 down from the 3.5% m/m current global limits.

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