Crude Oil Price Nears One-month Low as US Asks OPEC for More Supply

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Ejiofor Alike with agency reports
Crude oil price neared one-month low on Tuesday as supply concerns mount following a report that the United States government had asked Saudi Arabia and other major exporters to increase oil output.

The global benchmark, Brent crude futures lost $1.19 to trade at $74.10 per barrel, having fallen earlier in the day to $73.81, the lowest since May 8.

The  US West Texas Intermediate crude fell eight cents to $64.67 per barrel.
Bloomberg reported that the United States government has asked Saudi Arabia and some other members of the Organisation of Petroleum Exporting Countries (OPEC) to increase oil production by about one million barrels per day (bpd).

The request comes after US retail gasoline prices surged to their highest in more than three years and President Donald Trump publicly complained about OPEC policy and rising oil prices.

It also follows Washington’s decision to re-impose sanctions on Iran’s crude exports that had previously displaced about one million bpd from global markets, the report said.

The OPEC meets in Vienna on June 22 to decide whether the group and non-OPEC producers, including Russia, should raise output to make up for any supply shortfall from Iran and Venezuela.

Saudi Arabia and Russia were already discussing raising OPEC and non-OPEC oil output by around 1 million bpd, sources familiar with the matter said on May 25.

Global oil supply has tightened with the OPEC-led production cuts that began in early 2017.
OPEC had on November 27, 2015, decided to pump as much as it could to defend market share, an action that sent the price of oil to a low of $27 per barrel in February 2016.

But following the drop in oil price to an all-time low, OPEC and other major producers including Russia started to withhold output in 2017 to rein in oversupply that had depressed prices since 2014.

OPEC’s main objective for the cuts is to eliminate a global surplus in oil stocks and re-balance the market.
OPEC, together with Russia and a group of other producers, last November extended an output-cutting deal to cover all of 2018.

The initial deal, under which OPEC and non-OPEC producers are cutting supply by about 1.8 million barrels per day, had expired in March 2018.

Saudi Arabia and Russia have discussed boosting output to compensate for supply losses from Venezuela and to address concerns about the impact of US sanctions on Iranian output.