Oil slumps below $65 as OPEC clash looms, trade war escalates

Brent Crude Oil

It is said, though, that US and Saudi Arabia have been discussing ending the OPEC/non-OPEC pact long before this week's meeting and Saudi is going to propose what is in fact a USA -induced decision in Vienna. Thus, although Saudi Arabia and Russian Federation might decide increase the output, the higher production might not offset the disruptions.

Members of the Organization of Petroleum Exporting Countries are discussing an agreement that delivers 300,000 to 600,000 barrels a day of additional oil supply to global markets over the next few months, according to people briefed on the talks.

Tokyo ended 0.8 percent down, while Singapore sank more than one percent, Seoul dropped 1.3 percent and Manila tumbled 2.5 percent. Indeed, the single largest factor that could push prices down going forward would be a sizable increase in OPEC plus supply. The final decision needs to be unanimous for OPEC, however, and many analysts expect the meeting to be a disaster. The risk is that Saudi Arabia will choose to go it alone, boosting output.

OPEC is up for a tough meeting in Vienna this week after the leaders of the two groups of the OPEC/NOPEC production cuts-Saudi Arabia and Russia-have signaled that they are willing to boost production to offset what is sure to be further supply disruptions, mostly from Venezuela's collapsing oil industry and from a potential decline in Iran's oil exports in view of the returning USA sanctions.

Oil prices have fallen due to the direct result of the market recalibrating to the likelihood of higher OPEC plus production in the second half of the year.

Iraq and Iran have said they would oppose output increases on the grounds that such moves would breach previous agreements to maintain cuts until the year-end. "This could make a huge dent in the United States bid to export oil", he added.

United Kingdom government defeats pro-EU lawmakers on Brexit, for now
In a statement later, the Department for Exiting the European Union said the government had "agreed to look for a compromise". The government says the changes would weaken Britain's negotiating position and is seeking to reverse them in the Commons.

Elsewhere, Venezuela, which faces the threat of USA sanctions and is in the midst of an economic crisis, is almost a month behind delivering crude to customers from its main oil export terminals, and chronic delays and production declines could breach state-run PDVSA's supply contracts if backlogs are not cleared soon.

Escalating trade tensions between the USA and China were also weighing on global markets including oil, said John Kilduff, partner at energy hedge fund Again Capital LLC in NY.

Oil's market report for the month of June by EIA and Opec showing a stable demand growth while Non-Opec supply growth increased a bit. Brent crude jumped $1.55 to $74.99 a barrel. Total volume traded was about 11 per cent below the 100-day average.

"Oil is down in a knee-jerk reaction to possibilities of a trade war intensifying between the U.S. and China, and OPEC's production increasing the demand and supply balance", Takayuki Nogami, Chief Economist at state-backed Japan Oil, Gas & Metals National Corp. said by phone from Tokyo.

"This renewed commentary by Novak that they're looking for 1.5 million bpd of production is putting downward pressure on prices in a significant manner". After yearlong rise in oil and gasoline price, there's a call to control Oil price from rising too far and too fast.

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