OPEC Could Raise Oil Output if Prices Increase, Shortages Mount

Image of daily change for major financial markets

Image of daily change for major financial markets

Brent crude oil futures rallied 69 cents to $71.52 a barrel.

The research and analysis arm of the Organisation of Petroleum Exporting Countries pointed towards a much tighter market in 2019 as the group has seen its production fall significantly this year, led by curbs to Saudi Arabian output along with dramatic, involuntary declines from sanctions-hit Venezuela.

The IEA noted that concerns over global oil supplies boosted crude oil futures in March.

That is down 9.4 percent from 10.23 million bpd in February as state-owned refiners began maintenance.

Siluanov said oil prices could drop to $40 per barrel or even less for up to one year.

OPEC revised demand growth down in 2019 to 1.21 million bpd due to "slower-than-expected economic activity".

Current oil demand stands around 100 million bpd.

The report also said that Angola was one of China's three largest oil suppliers, together with Saudi Arabia and Russian Federation, with shares of 11.3%, 15.2% and 14.6% in February, respectively.

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On the demand side, most of the world's growth in fuel consumption is coming from Asia.

The prospective initiative from OPEC was reportedly encouraged by the recent rally in prices and because extending its production cuts with Russian Federation and other allies could over-tighten the market (the cartel agreed with allies to withhold 1.2 million barrels per day (bpd) of crude since the start of 2019, and its output fell 550,000 bpd in March to 30.1 million bpd).

After a production glut lead to prices dropping past year, OPEC members and allies including Russian Federation agreed in December to trim production.

OPEC and its allies led by Russian Federation are due to meet in Vienna on June 25-26 to set their policy.

However the IEA warned that demand fell in developed OECD countries by 0.3 million barrels per day (mbd) in the last three months of 2018 - "the first such fall for any quarter since the end of 2014". The dollar index slipped to its lowest against the euro in more than two weeks, making crude cheaper for non-U.S. buyers.

At the last OPEC meeting in Vienna, the group's members agreed to slash output by 812,000 bpd, with Russian Federation and nine other non-OPEC allies committing to a cut of 383,000 bpd for the first six months of 2019.

At the same time, the International Energy Agency (IEA) reported that OPEC production fell 550,000 bpd.

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