Oil Prices Steady After A Downward Trend Over Supply Concerns

Oil Prices Steady After A Downward Trend Over Supply Concerns

West Texas Intermediate dropped as much as 3.1 percent, while Brent crude futures, which traded above $80 a barrel last week, slumped near $75 in London Monday. Reuters reported that production could rise by as much as 1 million barrels a day.

But even if Asia and Europe are keen to take more U.S. crude, the record volumes are straining export infrastructure in the United States, limiting its ability to pump and ship more oil.

Now, after it became clear that Moscow and Riyadh are talking about a possible increase of 1 million bpd, oil prices lost all they had gained since the beginning of the month within a week.

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Looking back at history, in 2016, an oversupplied market resulted in oil prices falling to their lowest in more than a decade of below $30 a barrel.

The news comes amid reports quoting Russia's and Saudi Arabia's energy ministers as saying they are negotiating a ramp-up of production ahead of the end-2018 deadline.

China has also raised concerns about whether enough oil is being pumped, according to a Saudi statement issued after Energy Minister Falih called China's energy chief on Friday to discuss cooperation between their countries and to review the oil market.

Barkindo also said it was not unusual for the United States to put pressure on OPEC as some US energy secretaries had asked the producer group to help lower prices in the past.

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The Organization of the Petroleum Exporting Countries (OPEC), as well as top producer but non-OPEC member Russian Federation, started withholding supplies in 2017 to tighten the market and prop up prices, which in 2016 fell to a more than a decade low of under $30 per barrel.

Also weighing on crude oil, driller Baker Hughes reported on Friday that United States oil rig count went up by 15 oil rigs during last week.

Meanwhile, supply issues surrounding Venezuela and Libya, and the possibility of disruption in Iran because of the sanctions propped up prices.

The creation of the Strategic Petroleum Reserve (SPR) is founded on a number of joint global studies, according to the DOE-Oil Industry Management Bureau.

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Again, there is a geopolitical angle, with China, the world's biggest crude importer, under political pressure by President Trump pressure to buy more from the United States in order to lower the USA trade deficit with China. Although US oil exports hit a record high of 2.6mn bpd in the middle of May, there is concern that the US port infrastructure has insufficient capacity to support the increasing supply. In addition, USA oil production is ramping up quite steadily. The current global rig count now stands above the average set in 2017.

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