Economy

Oil heads for weekly gain as investors seek clues on OPEC output

Oil heads for weekly gain as investors seek clues on OPEC output

While there are those who believe that OPEC will vote to increase production when their agreement runs out, they are more likely to use rhetoric to keep prices stable.

Venezuela, a member of the Organization of the Petroleum Exporting Countries (OPEC), is almost a month behind in shipping crude to customers from its main oil export port, according to Reuters data, as chronic delays threaten to breach state-run PDVSA's crude supply contracts if they are not quickly cleared. The US last pressed Riyadh to increase output in 2012.

Iran's Kazempour predicted OPEC would not heed the USA request and said oil prices would jump in response to Washington's sanctions on Iran and Venezuela, as they did during a previous round of US sanctions against Iran. There have been reports that Saudi Arabia and Russian Federation will loosen production quotas and may pump up to an additional 1 million barrels a day now that the world's supply of oil has reached essential parity with world demand.

OPEC and its allies led by Russian Federation have cut a combined 1.8 million barrels per day of output since January 2017 and the cuts are due to expire at the end of 2018.

"It's a tug of war between the loss of supply from Venezuela and Iran and the potential output increase from OPEC and US shale", said Tony Nunan, risk manager at Mitsubishi Corp.

Meanwhile, Russian Energy Minister Alexander Novak said on Tuesday that oil demand should determine how OPEC and non-OPEC countries should adjust a current deal on oil output curbs. Total global production reached 74.69 million barrels a day, the first year-over-year decline since 2009. USA oil production is up 1.5 million bpd from a year earlier.

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Three sources familiar with the matter said a senior U.S. administration official had called Saudi Crown Prince Mohammed bin Salman before Trump's announcement to make sure Washington could count on Riyadh, the de facto OPEC leader. OPEC should discuss "the constraining effects of unilateral sanctions imposed by the United States of America, which represent an extraordinary aggression, financially and economically, for our national oil industry's operations and the stability of the market".

OPEC exports increased to 578 billion dollars a year ago from 451,800 million dollars in 2016, stressed the group's Annual Bulletin of Statistics 2018.

"It's a tug of war between the loss of supply from Venezuela and Iran and the potential output increase from OPEC and US shale", said Tony Nunan, risk manager at Mitsubishi Corp.

In the United States, national average gasoline prices approached $3 per gallon ahead of Memorial Day weekend, the highest price ahead of the Memorial Day weekend since 2014, the EIA says, and expects regular gasoline prices during the summer season-April through September-to average $2.90 a gallon this year, which would be 49 cents higher than last summer.

The US call for more oil comes despite its own record-setting production. PVM Oil Associates strategist Tamas Varga said, Reuters reported.

Analysts insist oil prices are heading higher.