Oil falls as concern mounts over OPEC supply, softer
Send a link to a friend
[May 23, 2018]
By Amanda Cooper
LONDON (Reuters) - Oil fell on Wednesday,
under pressure from a potential increase in OPEC crude output to cool
the market's recent rally and cover any shortfalls in supply from Iran
Across the broader financial markets, investors dumped equities and
other industrial commodities in favor of Japanese yen, U.S. and German
government bonds and gold, as concern mounted that setbacks to
U.S.-China trade talks would undermine increasingly fragile-looking
world growth. [MKTS/GLOB]
Brent crude <LCOc1> futures were last down 56 cents at $79.01 a barrel
by 1153 GMT, while U.S. crude <CLc1> fell 41 cents to $71.79 a barrel.
Oil prices have gained nearly 20 percent so far this year, with Brent
briefly rising above $80, driven primarily by coordinated supply cuts by
the Organization of the Petroleum Exporting Countries and partners
The price has also been affected by rising geopolitical tensions that
could dent global output just as demand is set to hit 100 million
barrels per day in the final quarter of this year, according to the
International Energy Agency.
In addition, the United States plans to reimpose sanctions on major oil
producer Iran, while an economic crisis has decimated Venezuela's crude
Based on the prospect of a shortfall in supply relative to demand,
investors had driven their bets on a sustained rise in the price of oil
to record highs earlier this year.
But with so much uncertainty over how sanctions might affect Iranian
supply, fund managers have cut their holdings of crude futures and
options by more than 10 percent in the last seven weeks to the lowest
level this year.
[to top of second column]
A general view of the Ceylon Petroleum Corporation's (CPS)
Sapugaskanda Oil Refinery in Colombo, Sri Lanka May 11, 2018.
"It does seem like any move above $80 attracts selling interest right now and
that could potentially lead us to a period of consolidation, where I think
$77.50 or even $75 might be in focus," Saxo Bank senior manager Ole Hansen said.
"We still have the unquantifiable impact of U.S. sanctions against Iran."
OPEC may decide to raise oil output as soon as June due to worries over Iranian
and Venezuelan supply and after Washington raised concerns the oil rally was
going too far, OPEC and oil industry sources familiar with the discussions told
"If there is a confirmation of easing OPEC+ supply restrictions, the $100+ a
barrel theme will have to move from 'lack of prompt supply' to 'lack of spare
capacity'," said Petromatrix strategist Olivier Jakob.
Rising supply in the United States, where shale production is forecast to hit a
record high in June, has limited the upward move in prices.
U.S. crude and distillate stockpiles fell last week, while gasoline inventories
increased unexpectedly, data from the American Petroleum Institute showed on
(Additional reporting by Naveen Thukral and Jessica Jaganathan in SINGAPORE;
Editing by Jon Boyle and Louise Heavens)
[© 2018 Thomson Reuters. All rights
Copyright 2018 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.