Oil fell on Thursday, driven lower by the prospect of the first increase in OPEC output since 2016 in the face of concern over supply from both Venezuela and Iran, while a surprise rise in United States crude inventories raised doubt over seasonal demand. Oil producers are debating an increase ranging from 300,000 barrels a day at the low end, backed by Gulf producers including Saudi Arabia, and a larger increase of about 800,000 barrels a day favored by Russian Federation, one person said.
The Organization of the Petroleum Exporting Countries may decide in June to lift output to make up for reduced supply from crisis-hit Venezuela and Iran, which was stung by the USA decision to withdraw from the nuclear arms control deal, OPEC and oil industry sources told Reuters.
Pressure has been on the rise since the International Energy Agency published its monthly report acknowledging that the oil market was now balanced and that commercial glut in major industrial countries fell by about 1 million barrels. Brent crude futures fell $2.35, or 3 per cent, to settle at $76.44 a barrel.
OPEC and its allies are likely to gradually boost oil output in the second half of the year to ease consumer anxiety as prices trade near $80 a barrel, said Saudi Minister of Energy and Industry Khalid Al-Falih.
On the economic data front, USA durable goods orders fell 1.7% in April but the weaker reading was largely offset by a better-than-expected growth in orders minus transportation, which rose 0.9% to mark the third straight month of gains.
The re-balance is sure to be the focus of a tense meeting between OPEC and its partners in the production cuts when they meet in Vienna next month.
Oil prices have jumped over 70% in the past year due to a rise in demand and restricted supply by OPEC.
Venezuela's output has fallen to about 1.4 million barrels per day, according to OPEC secondary sources, as its economic crisis grows and state-run PDVSA struggles to pay debts and fund operations. "In the meantime, even the slightest suggestion of such a decision, especially from the Saudis, could force a 1-2 percent price selloff as seen this morning". The decline was due to producers' greater adherence to their pledged output cuts - their compliance rate reached 152 percent in April - and to summer demand for crude and refined products, they said.