Oil prices fall on dip in China demand, surging United States output

WTI Crude Oil

WTI Crude Oil

USA sanctions on Iran are also threatening to reduce oil exports from the OPEC producer.

"Troubles over supply from Venezuela come at a time when OPEC is considering easing supply cuts which have been in place since 2017 and were implemented to support the price", London Capital Group head of research Jasper Lawler said.

More generally, Brent has been pushed up by the voluntary production cuts put in place past year, led by the Organization of the Petroleum Exporting Countries (OPEC) and Russian Federation.

Further weighing on prices has been rising U.S. output, which hit another record last week at 10.8 million bpd.

OPEC, and Saudi Arabia specifically, have assured in recent weeks that they would address "consumer and market anxiety" if need be, as gasoline prices around the world reached their highest in four years.

Saudi Arabia and Russian Federation were already discussing raising OPEC and non-OPEC oil output by roughly 1 MMBPD, sources familiar with the matter said in early May. The deal is due to expire at the end of 2018.

"It's a tug of war between the loss of supply from Venezuela and Iran and the potential output increase from OPEC and US shale", said Tony Nunan, risk manager at Mitsubishi Corp.

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The source said that after receiving Kazempour's request, the UAE's OPEC governor Ahmed al-Kaabi sought the advice of legal counsel. When the United States announced it would reimpose sanctions on Iran in November, Ice Brent futures rose by $2.36/bl on the day.

However, Saudi Arabia and Russian Federation have said cuts could be eased after receiving calls from consumers including the United States, China and India to support global demand. That compared with 9.6 million bpd in April. "We always have conversations with the USA about the stability of the oil market".

OPEC supply tends to more directly influence Brent, whereas US crude futures are tied to USA supply.

It's not clear how the US request has been conveyed, and the White House declined to comment on conversations.

In December 2016, at a meeting of oil producers in Vienna, 11 non-OPEC member countries agreed to cut oil production by a total of 558,000 barrels a day.

Reuters reported in late May that OPEC and its allies could raise production by about 1 million bpd from July to address any potential oil shortages.

Crude oil prices moved lower and are trading sideways forming a bear flag pattern which is a pause that refreshes lower.

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