Oil slumps as Saudi Arabia and Russian ministers signal output increase

Adjust Comment Print

With no elections in sight, the chances of the centre or even the state governments reducing their taxes are quite slim and the only hope for us is the global correction in oil prices which are expected to fall below $60 from the current $75.34 price. These factors are putting downward pressure on crude oil prices.

At that time, the Organization of Petroleum Exporting Countries (OPEC) and other major non-OPEC oil producers formed an agreement to reduce oil output and began by cutting 1.8 million barrels a day. In the week to May 15 the combined net-long dropped below one million lots to a five-months low. It collapsed from almost $100 a barrel to $50 and then it sank below $30 in early 2016.

For many, this will be enough to pull out of the sector if there is a threat of lower oil prices on the horizon.

She told CNBC the Saudi are motivated by a quid pro quo with President Trump, who pleased Saudi Arabia by abandoning the Iran nuclear deal, but is wary Americans will blame him for higher gasoline prices.

Oil rose earlier in May to a 3 1/2-year high after U.S. President Donald Trump chose to renew sanctions on Iran and as plunging Venezuelan output fueled concerns over disruptions. In the event that other countries fall in line with the USA and impose sanctions on Iran, supply from Iran could fall by as much as 1m/bpd. Bringing another million barrels back into production would close that gap. Considering US "friends" from Europe to Japan and South Korea now buy around one-third of Iran's export some impact on global supply can not be avoided.

Venezuela could eclipse OPEC's efforts to ward off a market tightening.

The drop in oil prices is welcome news for drivers, as well as companies and countries that buy a lot of energy.

Despite worries over Iranian and Venezuelan oil, there are many solutions for the global supply system to fill the gap and prevent any supply constraints. The catalyst behind the selling pressure are reports that Saudi Arabia and Russian Federation may increase production as early as June.

It is normal to have short-term blips in oil prices, which are driven by fear rather than fundamentals, Slaughter said. "No decisions made by two countries or three countries are going to be taken", he said Friday in an interview in St. Petersburg.

Saudi Arabia has 22 per cent of the world's petroleum reserves and is the world's largest exporter. The rise of U.S.

Meanwhile, surging US crude production showed no sign of abating as drillers continued to expand their search for new oilfields to exploit. USA production broke 10 million bpd for the first time in 48 years in November.

Iran and Venezuela have dominated the oil market discourse for a while and will continue to do so in the coming months. However, with USA becoming a major exporter of oil, higher oil prices up to a certain level can actually be beneficial with consumer loss being offset by rising capital investments by U.S. oil companies.

A lot of these companies got highly leveraged in the pre-2014 oil price boom.