Published: Tue, June 12, 2018
Money | By Ralph Mccoy

Oil mixed as OPEC cites uncertain market outlook for 2018

Oil mixed as OPEC cites uncertain market outlook for 2018

"Sentiment is caught in a tug of war between the drop in supply from Iran and Venezuela and the prospect of rising output from OPEC/non-OPEC coupled with rampant USA shale production", said Stephen Brennock, analyst at brokerage PVM Oil Associates.

After months of sharp oil price rises there is now considerable uncertainty as to the market's direction for the rest of the year, OPEC said on Tuesday as a key meeting of oil producers looms.

That buffer could shrink from more than 3 per cent of global demand now to about 2 per cent, its lowest since at least 1984, if the Organization of the Petroleum Exporting Countries, Russia and other producers decide to increase output when they meet on June 22-23, USA bank Jefferies said.

At 0325 GMT, July WTI crude oil is trading $66.12, up $0.02 or +0.03% and August Brent crude oil is at $76.39, down $0.07 or -0.09%.

In the United States, output has risen by nearly a third in the last two years, to a record 10.8 million bpd.

The oil price has risen steadily over the past year, with Brent crude establishing itself above $70 for the first time in years last month - some 30 percent higher than at the same time in 2017.

The minister, Jabar al-Luaibi, said that oil prices still require support and stability, and producers "should not over-exaggerate" the oil market's need for more supplies. OPEC kept its global demand expectations steady. OPEC responded to the last bear market by cutting output to help balance the supply glut.

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Later Tuesday, the U.S. Energy Information Administration raised its 2018 forecast for domestic output by 0.6% to 10.79 million bpd, but trimmed its 2019 forecast by 0.8% to 11.76 million bpd.

It said on Saturday that Russia's oil output had risen to 11.1 million bpd in early June, up from slightly less than 11 million bpd for most of May and above its target output of under 11 million bpd.

"So were they to raise by 1 million bpd, then 1.3 million bpd is left, scraping the low end of the range historically and uncomfortably tight given the high and rising geopolitical disruption risk", McNally said.

Based on the EIA definition, Robert McNally at consultancy Rapidan Energy Group said Saudi Arabia, Russia, Kuwait and United Arab Emirates together had spare capacity of about 2.3 million bpd.

Energy Aspects analyst Sam Alderson said he expected OPEC and Russian Federation to add about 500,000 bpd of production in the second half of 2018, which would reduce spare capacity as a percentage of demand to about 1.75 percent by December 2018.

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

Saudi Arabia has told Opec that the country increased oil output to a little more than 10 million bpd in May, from 9.9 million bpd in April.

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