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Oil prices drop on prospect of rising supplies Oil&Gas 09:40

17 June 2018

"However, looking at various sources, considerable uncertainty as to world oil demand and non-OPEC supply prevails, leading to a wide forecast range for demand for OPEC crude of around 1.8 million barrels per day", the report read.

Even if the supply gap, triggered by the return of United States sanctions on Iran and a major political crisis in Venezuela, is plugged, the oil market will likely remain vulnerable to disruption next year, the IEA warned.

Washington and Iran exchanged sharp words over oil prices on Wednesday, with Trump blaming OPEC for high oil prices and Tehran accusing him of stoking volatility after he withdrew last month from the nuclear deal.

Under one scenario weighed by the IEA, output from Venezuela and Iran by the end of 2019 could be 1.5 million barrels per day lower than it is today.

The idea of forming an oil bloc to counter OPEC's hegemony was mooted by Indian Petroleum Minister Dharmendra Pradhan during the International Energy Forum meeting in April in New Delhi. Key producers, including Saudi Arabia and Russian Federation, have reaffirmed the deal since then. While Opec countries are still the dominant suppliers to Asia, nearly all big importers in the region have increasingly turned to U.S. crude after a four-decade ban on American exports was lifted in late 2015.

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Opec and other producers will meet on 22-23 June in Vienna to discuss future production policy.

At 1030 GMT, the August ICE Brent crude futures contract was down 31 cents/b from Wednesday's settle, at $76.43/b, while the NYMEX July sweet light crude contract was up 16 cents at $66.80/b.

Saudi Arabia, the largest producer in the group, recorded the biggest increase in May as its oil production rose by 161,400 bpd to 10.03 million bpd. US light crude was 15 cents lower at $66.21.

Production fell in Nigeria, Libya and Venezuela, but increased in Saudi Arabia, Algeria and Iraq.

India has discussed with China the possibility of forming an "oil buyers club" that can negotiate better terms with oil sellers and get more U.S. crude to Asia to cut the dominance of oil producers' cartel Opec. President Vladimir Putin will host Saudi Crown Prince Mohammed Bin Salman, while energy ministers Alexander Novak and Khalid Al-Falih will also meet.

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After all, India and China are slated to fuel half of the global demand growth in energy in the next five years.

Fund manager Pierre Andurand at Andurand Capital is bullish. OPEC has yet to set new production levels beyond that, but the cartel's oil ministers are meeting again next week in Vienna.

"And that really caused the euro to take a dip and the (U.S.) dollar to go up, which is putting downward pressure on prices", said Phil Flynn, analyst at Price Futures Group in Chicago.

Rising US stocks are in part a result of the surge in US crude oil production, which has jumped by nearly a third in the last two years to a record 10.8 million barrels per day (bpd). Another issue raised by Pradhan was the "Asian Premium" - or a higher price - charged by West Asian oil exporters for shipments to Asian buyers, as opposed to Europe.

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Oil prices drop on prospect of rising supplies Oil&Gas 09:40