Oil price pulls back - where to now?

Oil prices fall as supply from top three producers set to rise

The price for Brent crude oil, the global benchmark, closed at $80.09 on May 17, its highest level in four years, in response to U.S. President Donald Trump's decision to pull out of a multilateral Iranian nuclear agreement.

Read: OPEC oil production cuts are history! Without compensating supply from other members, this number looks likely to expand as the United States reimposes sanctions on Iran and the collapse of Venezuela's oil industry worsens. The price of oil is rising due to a supply problem, even of shale oil, largely produced by the United States of America, which has also become one of the largest oil producing nations in the world in the past five years.

"I think the output reduction will not be as significant as many expect", RIA news agency quoted Novak as saying when asked if he agreed with an estimate that the sanctions could remove as much as 800,000 barrels a day from the market.

A contrary view was supplied by John Kilduff, founding partner of Again Capital: he pointed out that Tuesday's market sell-off "is going to work against a bigger number: [OPEC] is going to point directly to this price movement and say, 'See, it's all speculation, the market is just modestly balanced now for the first time in a couple of years'".

Adding to this, OPEC achieved its goal to trim OECD crude oil stocks to below the five-year average after agreeing to cut output more than a year ago, a senior OPEC source told S&P Global Platts on Monday.

Talk of rising output from the world's top two oil exporters wiped out this month's rally, which had been fueled by concerns that supplies from Iran and Venezuela will shrink.

More news: Fulham back in the Premier League

Oil prices steadied on Wednesday after slipping prices as Saudi Arabia and Russian Federation say they will pump more crude oil in response to falling global crude inventories and rising consumer prices.

OPEC knows from experience that pushing the price too high will bring on a flood of new US drilling and the cartel will be stuck back in 2014 when prices collapsed into the $40 range.

The problem with set-piece meetings like the OPEC gathering on June 22 in Vienna is that they focus tremendously on what is said, rather than what is actually done. Although US oil exports hit a record high of 2.6mn bpd in the middle of May, there is concern that the US port infrastructure has insufficient capacity to support the increasing supply.

In Brazil, the FUP oil workers union said workers had joined the call for a nationwide strike on at least 20 oil rigs in the lucrative Campos basin and other areas of the country.

The domestic oil industry in the United States has emerged in recent years a powerful swing force in the global petroleum economy. More importantly, the success of ARAMCO IPO also depends on higher oil prices and thus might push Saudi Arabia to keep oil prices elevated. Due to a sharp decline in oil prices between 2014 and 2017, about one-third of the shale companies went bankrupt or became financially distressed.

"There's some discord among the Gulf countries as to whether or not they should increase now or not", Kilduff said.

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