Oil slumps on output boost concerns
LONDON, May 28, 2018 – Crude prices slumped further on Monday, hitting their lowest levels in around six weeks amid indications OPEC and Russia are considering lifting production to meet the shortfall in supply from Iran and Venezuela.
A return to the oil production levels that were in place in October 2016, the baseline for the current deal to cut output, is one of the options for easing curbs, Russia’s energy minister said on Saturday.
His comments came after the energy ministers of Russia and Saudi Arabia met to review the terms of global oil supply, ahead of a key OPEC meeting next month.
The Organization of the Petroleum Exporting Countries and non-OPEC producers led by Russia have been curbing output by about 1.8 million barrels per day (bpd) to prop up oil prices and reduce high global oil stocks. The pact began in January 2017 and is set to expire at the end of 2018.
OPEC is scheduled to hold its next meeting on June 22 in Vienna.
U.S. crude futures dropped to their lowest since April 17 at $65.80 per barrel at one point, before recovering to $66.67 by 3:50AM ET (0750MT), down 1.8%.
Brent crude futures dropped as much as 2.6% to $74.53 per barrel, their lowest level in about three weeks. They last stood at $75.28, down 1.6%.
WTI and Brent tumbled around 4% on Friday, and are down by 6.4% and 9.1% respectively from peaks touched earlier in May.
A relentless increase in U.S. drilling for new production further dampened sentiment.
U.S. drillers added 15 oil rigs last week, bringing the total count to 859, the highest number since March 2015, underscoring worries about rising U.S. output.
Domestic oil production – driven by shale extraction – has already surged by more than 27% in the last two years, to an all-time high of 10.73 million bpd.
Only Russia currently produces more, at around 11 million bpd.
Trading volumes were likely to remain light with U.S. markets closed Monday for Memorial Day while the UK is also shuttered for a public holiday.
Comments from global oil producers for additional signals on whether they plan to exit their current production-cut agreement will remain at the forefront this week.
Fresh weekly data on U.S. commercial crude inventories on Wednesday and Thursday to gauge the strength of demand in the world’s largest oil consumer and how fast output levels will continue to rise will also capture the market’s attention.