Oil trades near $68 as inventory, Opec outputs weigh on market

Jermaine Castillo
August 6, 2018

Brent for October settlement dipped $1.82 to end the session at $72.39 on the London-based ICE Futures Europe exchange.

US crude futures slumped last month by the most in two years, and traded just below $68 a barrel yesterday on the New York Mercantile Exchange.

Prices had tumbled to a six-week.

Additionally, Russia appears to have increased its production in line with OPEC's decision in late June to increase its output, with its crude and condensate production increasing 1.4% last month to 11.215 million b/d, the energy ministry said yesterday.

Output by top exporter Saudi Arabia has also risen recently, to about 11-million bpd, and United States production is around that level as well.

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Saudi Arabia, Russia, Kuwait and the United Arab Emirates have increased production, as agreed at a meeting in June, to help to compensate for an anticipated shortfall in Iranian crude supplies once U.S. sanctions come into force later this year.

On Wednesday, prices sank when the USA government reported that in the prior week, total US inventories rose 3.8 million barrels, while supplies at Cushing fell 1.3 million barrels.

Furthermore, Weekly Distillate Stocks rose by 2.983 million barrels and Gasoline inventories dropped by 2.536 million barrels, coming in above prior surveys.

China has said it plans to impose tariffs on liquefied natural gas, raising concerns that it could also impose tariffs on oil, said John Kilduff, partner at Again Capital Management in NY.

Concerns about demand from China also increased Friday as state oil major Sinopec cut its purchases of US crude.

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US crude oil exports to China dropped by roughly 42% in July as the appetite for light sweet USA crude declines in the Asian giant ahead of the start of 25% tariffs on USA oil imports, Kallanish Energy learns. Novak said that higher production was due to the need to maintain the market's stability. "We've seen the Opec July numbers increasing quite drastically month-on-month and along with that, Russian production back at pre-deal levels", ING commodities strategist Warren Patterson said.

While the Saudis and their Gulf allies said they would increase production to make up for countries unable to, Iran argues that they're violating individual country targets and ultimately betraying the organisation.

Saudi Aramco cut its September price for its Arab Light grade for Asian customers by $0.70 a barrel versus August to a premium of $1.20 a barrel to the Oman/Dubai average, it said on Thursday.

At a June 22 meeting, OPEC agreed to boost output by returning to 100 percent compliance with oil output cuts that took effect in January 2017, after months of underproduction by countries including Venezuela and Angola.

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