Oil prices mixed but expected output increase a drag

Oil prices fall as supply from top three producers set to rise

According to Reuters, the discussions were triggered by complaints from US President Donald Trump that the oil price has soared too high and was being propped by artificially by OPEC, after Brent Crude hit its highest level since late 2014 at $80.50 this month.

Saudi Arabia and Russia's proposal to revive production signals supplies are now tight, and isn't a bearish development, Goldman analysts including Damien Courvalin wrote in a report.

OPEC wants to world to know that it is in control and has the power to raise output just enough to replace supply lost to the turmoil in Venezuela and the sanctions on Iran.

Energy ministers from Saudi Arabia, the United Arab Emirates and Kuwait plan to meet on Saturday to discuss OPEC matters, according to people with direct knowledge of the matter. Venezuela has seen a reduction in output of 579,000 bpd overshooting its target production cut of only 95,000 bpd. The entire nation has been feeling the pinch but with the fuel prices no longer being regulated by the central government and the crude oil prices going up, the oil companies have their hands tied.

This year, the price of oil went up from between $60 to $80 per barrel, a development that severely affects an economy like that of Zimbabwe, since is a non-producing oil country.

Any escalation in political uncertainty in Libya could attenuate the already high over-compliance levels by OPEC members and put pressure on oil prices.

Goldman has been an oil bull since early previous year, saying growing demand and output reductions by OPEC and its allies will help revive crude from the worst crash in a generation.

This increase was viewed by several refining customers as unexpectedly large, with Sinopec, Asia's largest refiner, showing its displeasure by cutting the volumes of Saudi crude it would lift in June, the second month in a row it decided against taking its normal allocation.

Novak did not say whether OPEC and Russian Federation would decide to boost output by 1 million bpd at their June meeting. The global benchmark traded at a US$8.56 premium to WTI for delivery the same month.

The prospect of lost exports from Iran in the face of renewed USA sanctions and falling output in crisis-afflicted Venezuela is coaxing the producers to start winding down the historic deal, CNBC reported. This is prompting Saudi Arabia, Russia and other major producers to seriously consider gradually boosting production in an effort to stop the price rise from getting out of control.

"The pace of the recent rise in oil prices has sparked a debate among investors on whether this poses downside risks to global growth", Chetan Ahya, chief economist at USA bank Morgan Stanley, wrote over the weekend in a note.

Here's the problem: "Middle Eastern crude oil producers could be one the biggest losers from the new regulation, because they pump high-sulfur crude, Amrita Sen, chief oil analyst at Energy Aspects", told CNBC.

"There's some discord among the Gulf countries as to whether or not they should increase now or not", Kilduff said.

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