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Oil Holds Gain as U.S. Stockpiles Fall While OPEC Remains Split

17 June 2018

"However, looking at various sources, considerable uncertainty as to world oil demand and non-OPEC supply prevails, leading to a wide forecast range for demand for OPEC crude of around 1.8 million barrels per day", the report read. Most of that non-OPEC supply growth would come from the USA, it said.

U.S. President Donald Trump renewed his attack on OPEC on Wednesday, and the International Energy Agency said the world may face a supply gap by late 2019 if OPEC can not cover any shortfalls. About 1 million barrels a day of the current output cuts may not be recoverable.

Opec and its allies had accomplished their mission of reducing global oil stocks to desired levels, the International Energy Agency (IEA) reported in April, signalling that the market could become too tight if supply remained restrained.

Crisis-wracked Venezuela's oil production continued to shrink, plunging for the 10th straight month to 1.36 million b/d.

Trump's tweet comes ahead of a key OPEC meeting with Russian Federation on June 22 to discuss raising production for the first time since 2016, when they began cutting production by a 1.8 million barrels per day.

West Texas Intermediate traded at US$66.03 a barrel and Brent crude was at US$75.83 a barrel.

"The prospect of easing supply curbs from Opec-led producers continues to be reflected in oil's overall depressed price", Otunuga said.

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Oil prices steadied on Thursday, but were likely to remain under pressure from evidence of rising USA output and uncertainty over the outlook for supply before a key meeting next week of the world's largest exporters.

"The market will be finely balanced next year, and vulnerable to prices rising higher in the event of further disruption", the IEA said in its monthly report. The volume reflected higher production from Saudi Arabia, Algeria and Iraq, and declines from Nigeria, Venezuela and Libya.

"Those in the know might get a hint as early as today - the topic will surely come up between President Putin and the Saudi crown prince as they watch their countries' teams in today's opening game of the football World Cup together", said Tamas Varga, an analyst at PVM Oil Associates Ltd.in London. The ministers are gathering on June 20 as they debate an exit plan for the 2016 production cut deal, one of the key factors for pushing up oil prices.

Prior to Trump's April tweet, the price of oil had soared from $50 a barrel last fall to over $70. A gallon of regular gasoline is now $2.91, up 25 percent from the year-ago level.

However, OPEC's president, Suhail Al Mazrouei, said on Tuesday that the USA has not asked the group to increase oil production in the wake of political unrest in oil-rich Venezuela and US sanctions on Iran.

According to secondary sources, total OPEC crude oil production averaged 31.87 million bpd in May, an increase of 35,000 bpd from the previous month.

In the letter, the senators said a run-up in oil prices is "effectively a tax on every American family's discretionary budget" since the price of oil directly affects the price of gasoline.

Oil Holds Gain as U.S. Stockpiles Fall While OPEC Remains Split