Economy

Oil prices drop on surprise U.S. stockpile build

Oil prices drop on surprise U.S. stockpile build

This means crude oil prices could well fall to $56-60 on Brent.

West Texas Intermediate for July delivery fell 46 cents to US$65.06 a barrel on the New York Mercantile Exchange as of 8.41am local time.

Looming new United States sanctions against major oil exporter Iran have further tightened worldwide oil markets.

US light crude CLc1 settled down 79 cents, or 1.2 percent, at $64.73 a barrel.

The surge in US production has pulled down WTI into a discount versus Brent of more than $11 a barrel, its steepest since 2015.

The group and Russian Federation are due to meet at its headquarters in Vienna on June 22 to discuss production policy. For the week, USA crude was set to fall 0.2 percent, while Brent was set to fall 0.6 percent.

Iran would benefit less than Saudi Arabia from an increase in supplies if it can not raise output, as well as receive a lower price for existing production.

Three sources familiar with the matter said a senior U.S. administration official had called Saudi Crown Prince Mohammed bin Salman before Trump's announcement to make sure Washington could count on Riyadh, the de facto OPEC leader.

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Oil prices rebounded on Tuesday on expectations that inventories in the United States may decline, but increasing USA production and concerns that OPEC may raise output continue to weigh on sentiment.

According to the EIA, US crude inventory saw a build of 2.072 million barrels to 436.584 million barrels for the week ended June 1.

The organization reduced by about 1.2 million barrels per day.

Crude oil prices moved lower and continued to form a bear flag pattern.

Outside OPEC, however, there were ongoing signs of rising output. Washington last pressed Saudi Arabia to increase output in 2012.

As interesting as all these numbers may be, the June 22 OPEC meeting is drawing the most attention right now.

"As in previous years, the bulk of crude oil from OPEC countries was exported to the Asia and Pacific region, in the amount of 15.56 mb/d or 62.6 percent".

If the partners in the production cut deal decide to raise production and if this move depresses oil prices, Iran and Venezuela will be two of the biggest losers from lower oil revenues, because they can't raise their respective production levels, also because of the US sanctions.