Oil Prices Diverge as Venezuelan Output Approaches Crisis Mode

Brent crude hit its lowest price in almost a month on Tuesday following after sources said the USA government had asked Saudi Arabia and other major exporters to increase oil output.

A pump jack lifts oil out of a well, during a sandstorm in Midland, Texas, U.S., April 13, 2018.

However, the dip was short-lived as prices picked up a bid after the API data showed crude inventories fell by 2 million barrels in the week to June 1 to 432.8 million. Fuel inventories also rose. Iran's crude oil output could fall 1 million bpd as a result of renewed US sanctions, according to a note from Standard Chartered.

Brent crude, the global benchmark, rose 0.3% to $75.62 a barrel on London's ICE Futures exchange.

"The continuing increase in crude oil production is weighing on the market, and quite significantly compared to this time previous year", Andrew Lipow, president of Houston-based Lipow Oil Associates. The markets were expecting a drop of 1.8 million barrels.

Around the same time, when India had expressed frustration over rising oil prices, Saudi Energy Minister Khalid al-Falih told Pradhan that supporting global economic growth was one of the Gulf nation's key goals.

Saudi Arabia and Russian Federation were already discussing raising OPEC and non-OPEC oil output by around 1 million bpd, sources familiar with the matter said on May 25.

The Organization of the Petroleum Exporting Countries and Russian Federation will meet on June 22-23 to decide how much production they will increase as global inventories have tightened while Venezuela's production has dropped more than expected.

Reuters reported on May 25 that the producers were considering a supply increase of 1 million barrels per day, with a final decision to be made at the June meeting in Vienna. Its output has been hampered by inadequate investment, mismanagement and US sanctions.

The U.S. government has unofficially asked Saudi Arabia and some other OPEC producers to raise oil output, three OPEC and industry sources said, although it has not requested a specific figure.

Oil is trading near the lowest level in nearly two months after Saudi Arabia and Russian Federation signaled in late May that they were ready to ease output curbs to fill potential supply losses in Iran and Venezuela.

The request comes after USA retail gasoline prices surged to their highest in more than three years and President Donald Trump publicly complained about OPEC policy and rising oil prices.

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