At their meeting in Vienna last month, OPEC countries and key ally Russian Federation said they will raise production by a million barrels per day, but analysts are concerned it may not be enough for oil prices to spiral out of control, at least until new US shale production comes on stream. Some members should remember that the United States is defending them for little reciprocal benefits, he added.
OPEC members agreed June 23 to increase crude oil output by pumping 1 million barrels more daily, but it is still unclear how much of the oil produced would ease off prices in a period-the northern hemisphere's summer-generally associated with high oil demand. Rising gasoline prices could create a political headache for Trump before November mid-term congressional elections by offsetting Republican claims that his tax cuts and rollbacks of federal regulations have helped boost the USA economy.
Although Iran does not have spare capacity to pump more oil to offset lower oil prices, experts say renewed sanctions mean the country is more interested in tightening the screws on arch-rival Saudi Arabia that prefers higher prices.
OPEC, together with a group of non-OPEC producers led by Russian Federation, reduced output in 2017 to prop up the market.
Harry Tchilinguirian, head of commodities strategy at BNP Paribas, said when an investor does not have a strong view on which way the price of crude oil futures might move, they tend to take a bet on options instead, to protect themselves.
Energy consultancy FGE on Friday issued a stark warning of looming supply shortages due to USA sanctions against Iran, and because of disruptions elsewhere.
"On the bearish side both Saudi Arabia and Russian Federation are living up to their promise to increase output", said Tamas Varga of oil broker PVM. For the United States, the Swiss investment bank said it wasn't optimistic about shale oil filling the market gap.
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While Saudi Arabia is facing mounting pressure from Trump to do more, America's oil sanctions on Iran and trade frictions with China are adding to uncertainties as the planned U.S. tariffs on Chinese goods are set to start on Friday.
The most-active Brent LCOc1 futures contract for September delivery settled up 48 cents at $78.24 per barrel.
An International Energy Agency scenario projects oil production falling by around 1.5 million bpd due to the loss of Iranian and Venezuelan oil.
Oil prices have indeed been by Trump's decision to withdraw from the Iran nuclear deal and to impose sanctions blocking American and most European countries from doing business with Iran. High fuel prices drain money from consumers' pockets, hurting economic growth while adding to inflation.
However, the Chinese government has not yet specified a date on which it may introduce duties on imports of US crude.
According to Commerzbank, OPEC now has just enough oil to meet global demands without Iran's supply.
The U.S. government is lobbying Iranian oil importers, including China and India, and "asking them to go to zero, absolutely yes", according to a U.S.