Oil drops due to increased production from OPEC and the United States, offsetting the shortfall of sanctions from Iran

SINGAPORE (Reuters) – Oil prices eased on Tuesday, with forecasts of increased output from the United States and the producers' club, OPEC, offsetting the bulk of the expected US sanctions deficit. Iran, but the markets remained tense.

Brent futures were at $ 71.86 a barrel at 0103 GMT, down 18 cents or 0.3% from their last close.

The WTI (West Texas Intermediate) futures price is $ 63.42 per barrel, down 8 cents from their previous settlement.

Oil prices jumped by about 40% between January and April, due to supply cuts attributable to the producers' club dominated by the Middle East, the Organization of Petroleum Exporting Countries (OPEC), as well as US sanctions against the Iranian and Venezuelan producers.

However, prices suffered downward pressure last week after US President Donald Trump openly lobbied OPEC and its de facto leader, Saudi Arabia, for what they said. increase production in order to cope with the lack of supply caused by the reinforcement of the sanctions imposed on Iran.

Stephen Innes, head of trading at SPI Asset Management, said the group of producers "will want to avoid at all costs that the price of oil reaches levels that will trigger a devastation of demand, while it is clearly in the interest of OPEC to maintain a solid floor. prices".

Merrill Lynch, of the Bank of America, said that "Iranian oil production would fall to 3.6 million barrels per day in 3Q18 during the 2H19 period, to 1.9 million barrels per day in 2H19, while the sanctions come into force and the derogations expire ".

Despite this, the bank said expect "an almost balanced market in 2019," while the production of OPEC and the United States would increase.

French bank BNP Paribas said it expects oil prices to rise "in the short term," crude producers "excessively tightening the market in the face of unforeseen supply disruptions and demand. of resilient oil ".

The bank said it was expecting a rise in crude oil markets until the third quarter of 2019, adding that prices "would begin to become vulnerable to a sharp rise in US light crude exports." through the expansion of the capacity of pipelines and terminals ".

US exports exceeded 3 million barrels per day (bpd) for the first time in early 2019, in the context of an increase in production of more than 2 million bpd over the past year, reaching a record of more than 12 million bpd.

BNP Paribas said it saw WTI average $ 63 a barrel in 2019, up $ 2 from previous forecasts, while Brent would average $ 71 a barrel, up $ 3 a barrel. compared to previous estimates.

"In 2020, WTI would average $ 64 a barrel and $ 68 a barrel," said the bank.

(GRAPH: link between production and exports of crude oil in the United States: tmsnrt.rs/2ULQiTd).