Published: Fri, July 06, 2018
Money | By Bruce West

Oil falls as OPEC output rises, more production planned

Oil falls as OPEC output rises, more production planned

Oil traded near its highest in 3-1/2 years on Thursday, boosted by potential disruptions to flows from Iran and the Middle East. Brent crude futures were at US$78.12 a barrel at 1050 GMT, down 12 cents.

REUTERS/Jonathan ErnstSaudi Arabia's King Salman bin Abdulaziz Al Saud (L) receives US President Donald Trump for the Arab Islamic American Summit in Riyadh, Saudi Arabia May 21, 2017.

On Sunday, Iran's Vice President Eshaq Jahangiri said that the country was considering oil exports by the private sector in a bid to thwart U.S. sanctions.

According to a Reuters survey, Saudi Arabia's output is up by 700,000 barrels per day from May, while Russian output is up to 11.06 million barrels per day in June from 10.97 million barrels per day in May, according to the Russian Energy Ministry, cited by Reuters.

"Saudi Arabian supply increases are largely compensating for production losses and instability in key producer countries", said John Driscoll, chief strategist at JTD Energy Services Pte, who has spent more than 30 years in the oil trading industry in Singapore.

A little more than an hour after Trump's tweet, the state-run Saudi Press Agency reported on the call, but offered few details.

In response to the recent comments, Robbie Diamond, SAFE's CEO and President, said in a statement: "Asking the cartel to increase output is like trying to put a Band-Aid on a broken system that shouldn't even exist in the first place.

Iran. OK. You think of it. Iran is their big enemy, so they are going to have to do it", Trump said. After leading the Organization of Petroleum Exporting Countries and its allies to cut production at the start of previous year, the kingdom has seen its hold on the world's top oil consuming region reduced as rivals from the Iran boost exports.

Oil briefly touched $75 a barrell on Tuesday before retreating following the news of the Saudi government decision.

The 9.1 trillion 2018 budget was predicated on a benchmark price of $51 per barrel and production of 2.3 million barrels per day.

The drop is in contrast to the strong growth in oil prices seen last week as prices started to nudge close to $80 per barrel.

USA crude futures CLc1 were down 58 cents at $73.56 per barrel by 12:00 p.m. EDT (1600 GMT), still in sight of Tuesday's 3-1/2-year high above $75. The announcement sent oil prices soaring, and markets have been on edge since. He also said he and senior Treasury Department officials would visit Gulf states "in the coming days". The two main importers of Iranian crude are China and India; both of whom import around 400,000 BPD now.

Traders said the decline in fuel inventories was largely down to the outage at Syncrude Canada's 360,000 barrels per day (bpd) oil sands facility near Fort McMurray, Alberta, which is expected to last through July.

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