By Tsvetana Paraskova
As soon as next month, OPEC may decide to reverse some of the production cuts in place since the beginning of 2017, to respond to supply concerns over plummeting Venezuelan production and the potential loss of some of Iran’s oil exports due to the return of U.S. sanctions, sources at OPEC and within the industry told Reuters.
OPEC members from the Persian Gulf are leading early talks on when the cartel could start lifting production to “cool” the oil prices after Brent Crude hit $80 a barrel last week, the sources told Reuters on Tuesday. The initial talks are also focused on how much volume each OPEC member could add, according to the sources.
“All options are on the table,” and a possible decision to ease the cuts could be made next month at the Vienna meeting, one oil source from a Gulf nation told Reuters.
According to a source at OPEC, one of the options that the group is discussing is indeed deciding in June to increase supply.
Sources also told Reuters that concerns over the high oil prices raised by the United States also prompted OPEC to launch internal talks.
Last month, U.S. President Donald Trump tweeted that oil prices are “artificially very high” and “will not be accepted”, slamming OPEC for manipulating the price of oil.
Last week, when Brent touched $80 a barrel, Khalid al-Falih, the Energy Minister of OPEC’s largest producer Saudi Arabia, said on Twitter that he had spoken on the phone with a number of fellow ministers, including those of the UAE, USA, Russia, India, and Korea, “to coordinate global action to ease oil market anxiety.”
On Wednesday, oil prices were down early in the morning, after the American Petroleum Institute (API) reported on Tuesday a build in gasoline inventories and ahead of EIA’s weekly inventory report due out at 10:30 a.m. EST. After the EIA released its weekly report showing a surprise crude oil inventory build, both Brent and WTI benchmarks fell further.
According to Ole Hansen, Head of Commodity Strategy at Saxo Bank, a buying fatigue is emerging in crude oil, as “Brent crude oil has been struggling to break above $80/b despite a deteriorating outlook for production in Venezuela and the not yet quantifiable impact of US sanctions on Iran.”
“A ten-dollar rally since early April could indicate that tighter supply may begin to be priced in,” Hansen wrote on Wednesday, adding that “Geopolitical risks are likely to keep a relatively solid floor under the market. But the recent price behaviour could indicate the market is getting ready to consolidate with $77.50/b being the first level of support.”