Oil prices fell sharply on Friday after OPEC and Russia indicated they may raise output this year to offset the impact of rising prices. That saw oil prices suffer their biggest fall for six weeks.
Friday’s slide ended up as the single major influence at week’s end and ahead of the Memorial Day long weekend in the US.
The comments, made at a meeting between senior OPEC officials and Russia my end up being hot air, but we won’t know until a meeting between the groups on June 22 which will vote on cutting the global daily output cap from 1.8 million barrels to perhaps a million barrels or less.
As a result of the news of the talks and rumoured cuts, Brent, the global benchmark, settled at $US76.44 a barrel on Friday, down almost 3% for the day, 2.6% for the week and well below the three and a half year high of $US80.50 set 10 days ago..
In the US West Texas Intermediate dropped 4% to settle at $US67.88 a barrel on Friday to be down 4.7% for the week, the biggest fall in a month.
Ministers from Saudi Arabia and Russia said Friday they are considering increasing production in the face of possible supply risks from Venezuela and Iran, which are both under threat by US sanctions.
OPEC and a group of non-OPEC countries led by Russia have since January 2017 cut production by 1.8 million barrels a day in an effort to tackle the global supply glut that had pushed prices to multiyear lows.
The plans to now lift production again come amid worries that Iran’s exports will decline after the US’s decision to pull out of the nuclear deal with Tehran and as output has collapsed in Venezuela (last week’s elections will do nothing to reverse that trend in Venezuela).
A decision, which will relax production curbs that have been in place for 17 months, could be finalised at a meeting of major oil producers in Vienna on June 22-23, Reuters reported.
The news hit Wall Street on Friday, sending energy shares down sharply and airlines higher.
But it won’t stop US petrol prices from hitting the key $US3 a gallon this week as the summer holiday/driving season kicks off the three day Memorial Day holiday break.
Not helping sentiment was news on Friday of a rise in the number of active US oil rigs, which suggests a possible uptick in production, also contributed in the decline in prices.
Baker Hughes on Friday reported that the number of active U.S. rigs drilling for oil was up 15 at 859 this week. That was the largest weekly rise since the week ended Feb. 9. The total active US rig count, which includes oil and natural-gas rigs, climbed by 13 to 1,059, the highest for more than two years.
