Oil traders are speculating whether or not opposition from Iran and Venezuela will derail a production increase from Russian Federation and Saudi Arabia (it won't).
Commenting on rumors of the U.S. administration asking for an output hike, Suhail Al Mazrouei, the current head of OPEC and energy minister of the United Arab Emirates, said that they haven't received any official or unofficial communication on that issue.
"I can tell you there is no truth in that whatsoever", he added in an interview with CNNMoney Emerging Markets Editor John Defterios. According to Reuters, a high level Trump administration official called Saudi Arabia a day before Trump was set to announce the USA withdrawal from the Iran nuclear deal, asking for more oil supply to cover for disruptions from Iran. Given that growing demand and the time it takes to bring new oil on-line in response to higher prices, it's no surprise prices have risen.
Analysts surveyed Monday by S&P Global Platts expect crude stocks to have declined by 2.6 million barrels for the week ended June 8, while gasoline stocks are likely to have increased by 200,000 barrels.
While the Trump administration's request might irk OPEC members, with Iran obviously the most aggrieved, the apparent willingness of Saudi Arabia to comply with Washington's request has ignited furor from within the group.
JPMorgan predicts oil prices heading back to the $50s. "No good and will not be accepted!" U.S. oil futures were trading 1% lower on Monday at $65 per barrel. Both of these major oil producers are either already increasing their production or are planning to do so. OPEC oil producers and Russian Federation are due to meet in Vienna on June 22 to discuss easing supply caps that have been in place since the beginning of 2017.
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"Producers from within and outside OPEC have not yet reached the goals set", Iraqi Oil Minister Jabbar al-Luaibi said in a statement.
Venezuelan production is falling due to sanctions, economic crisis and mismanagement, while Iran faces US sanctions over its nuclear programme that are likely to curb exports in the next few months. With a range of of 1.7 million barrels a day between the upper and lower estimates, demand could either be significantly higher, or slightly below, than OPEC's current output. "It has never been a political organization".
Jason Gammel, an analyst at Jeffries, said: "If there are any further supply interruptions then there would be very little that the markets could do".
Al Mazrouei also acknowledged that USA shale producers have played a key role in the market amid the supply disruption in Venezuela.
Malek went on to note that technological advances will enable producers to lower their all-important break-even prices and earn a 15 percent cash return on the barrels they produce.
Barclays said in a note that it expected the group to increase production by 700,000 to 800,000 bpd.