Published: Fri, June 08, 2018
Markets | By Otis Pena

Oil rises as reality dawns over Venezuela's export crisis

Oil rises as reality dawns over Venezuela's export crisis

The group and Russian Federation are due to meet at its headquarters in Vienna on June 22 to discuss production policy."The June 22 OPEC meeting will now likely become the most important factor influencing (the) crude price", Jefferies said.

July WTI crude oil settled at $64.73, down $0.79 or -1.22% and August Brent crude oil closed at $75.36, down $0.02 or -0.03%.

Brent crude futures LCOc1 were up 85 cents at $76.21 a barrel by 1222 GMT, while U.S. West Texas Intermediate (WTI) crude CLc1 rose 58 cents to $65.31 a barrel. The rare request came after USA retail gasoline prices surged to their highest in more than three years and President Donald Trump publicly complained about OPEC policy and rising oil prices on Twitter. Gains grew when Algeria's oil minister indicated OPEC would focus on balancing the market rather than on rolling back production caps.

According to Reuters data, Venezuela is almost a month behind in shipping crude to customers from its main oil export port as chronic delays threaten to breach state-run PDVSA's crude supply contracts if they are not quickly cleared. Angola has also seen output decline rapidly from its aging fields.

The delay could breach Venezuela's state-run PDVSA's crude supply contracts if they are not quickly cleared.

Tankers waiting to load more than 24 million barrels of crude, nearly as much as state producer PDVSA shipped in April, are sitting off the OPEC member's main oil port, according to shipping data.

Noting Venezuela's troubles and OPEC's pending decision on supply, London Capital Group head of research Jasper Lawler said "oil traders could be in for an increased bout of volatility".

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Venezuela's supply problems have materialized while the Organization of the Petroleum Exporting Countries has voluntarily cut output since 2017 to help bring global output in line with demand.

More generally, Brent has been pushed up by voluntary production cuts led by the Middle East dominated producer cartel of the Organization of the Petroleum Exporting Countries (OPEC) and by top producer Russian Federation, which were put in place in 2017.

Venezuela has the world's biggest oil reserves and is a key supplier to American fuel markets but its output has been hampered by inadequate investment, mismanagement and a confrontation with the United States that has led to sanctions.

In other news, OPEC-member Iraq said Wednesday that a production increase was not on the table as the market was stable and prices good.

"Venezuela's worsening economic crisis, together with ongoing geopolitical tensions in the Middle East, will remain supportive of oil prices", Abhishek Kumar, Interfax Energy senior analyst said.

Further weighing on prices has been surging US output, which hit another record last week at 10.8 million bpd.

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