Oil hits multi-week lows on fears of growing supplies

Oil hits multi-week lows on fears of growing supplies

Oil hits multi-week lows on fears of growing supplies

Saudi Aramco, the state-owned producer of the world's largest crude exporter, will release its official selling prices (OSPs) for July-loading cargoes, and these in turn largely set the prices for much of the exports from the Middle East.

The drop was accompanied by relatively heavy volume suggesting some capitulation from the extreme long crude speculative positioning.

Crude futures in NY slid 1.6 percent on Tuesday after tumbling 4 percent on Friday.

Russian Federation and Saudi Arabia would not like the prices to jump from the current $75-$80 to $100, he said.

Volatility - a gauge of demand for a particular option - has risen sharply for bearish sell options at around $67 a barrel that expire immediately after OPEC's meeting with its partners that will run from June 22-23.

The price of Brent crude LCOc1 meanwhile, has fallen by 7 percent to around $75 a barrel from 2014 highs above $80 a barrel just a week ago.

The 713,000 barrel-a-day decline in Opec's total supply between 2016 and last month can be accounted for nearly entirely by the decline in Venezuelan output, which has fallen by about onethird - 718,000 barrels a day - over the period.

WTI for July delivery fell as much as 3.1% to $65.80/bbl and traded at $66.95 on the New York Mercantile Exchange. Brent crude fell about 6% to near $76 as well. Opec and his nation do not plan to stick to existing output cuts, he said.

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Was a phone call all it took for Al-Falih to make a U-turn in his statements regarding oil prices and start assuring the market that there is sufficient supply and there is no reason why Brent should trade above US$80? With inventory levels now below their 5-year average and the oil price recovery more than sufficient for the majority of oil producing company's and countries this move looks to be about cooling off the recent stampede in pricing rather than plugging any major deficit in supply.

However, investors' fears about plunging oil prices may be unfounded, since cutting production by one million barrels per day would not, in reality, create such a big surplus. Further, since the election win of President Nicolas Maduro, the risk of USA imposing sanctions on Venezuela's oil industry have risen and if imposed could lead to further supply disruptions.

"Given that our crude balance is short some 825,000 bpd over (the second half of the year), a gradual increase of about 1 million bpd would probably limit stock draws to quite some extent", Vienna-based consultancy JBC Energy said.

The United States is set to export 2.3 million barrels per day (bpd) in June, of which 1.3 million bpd will head to Asia, estimated a senior executive with a key US oil exporters.

"They want stability in the market", said Slaughter.

"Some 10 percent is probably the maximum level", he said.

"Tight (shale) oil's been eating OPEC's lunch for the last few years".

Baker Hughes (BHGE) on Friday reported that the number of active US rigs drilling for oil (http://www.marketwatch.com/story/US-oil-rig-count-makes-biggest-weekly-climb-since-february-2018-05-25) rose 15 to 859 in the most recent week.

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