Oil mixed as OPEC cites uncertain market outlook for 2018

Brent Crude Oil

Spare capacity is the extra production oil producing states can bring onstream and sustain at short notice, providing global markets with a cushion in the event of natural disaster, conflict or any other cause of an unplanned supply outage.

The oil markets were mixed on Monday, with US crude firmer while Brent inched down, as comments from the Iraqi oil minister cast doubt as to whether the Organization of the Petroleum Exporting Countries would decide to boost output at its upcoming meeting.

Overall OPEC production rose by 35,000 bpd to 31.87 million bpd as production fell in Nigeria, Venezuela and Libya, offsetting Saudi Arabia's gains.

Drawdowns "in crude oil inventories, healthy oil demand and geo-political developments have supported this rising trend", OPEC said.

"So were they to raise by 1 million bpd, then 1.3 million bpd is left, scraping the low end of the range historically and uncomfortably tight given the high and rising geopolitical disruption risk", McNally said.

Iraq's oil minister said producers should not be influenced by pressure to pump more oil.

OPEC kept its projected world oil demand growth unchanged for 2018, but offered a slight upward revision to its total non-OPEC supply by 130,000 bpd to 59.75 million bpd.

Benchmark Brent crude LCOc1 was down 65 cents at $75,81 a barrel by 1330 GMT.

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Later Tuesday, the U.S. Energy Information Administration raised its 2018 forecast for domestic output by 0.6% to 10.79 million bpd, but trimmed its 2019 forecast by 0.8% to 11.76 million bpd. US crude reversed losses to rise 0.4% to $66.36 a barrel. The stock is forming a cup base with an 89.40 entry point. Shares are poised for a breakout from a cup-with-handle base with a 131.18 buy point. Royal Dutch Shell (RDSA) was down 2.1%.

OPEC will meet on June 22 to discuss a potential change to its oil production.

Russian Federation and Saudi Arabia reportedly began discussions in April about an output hike.

Consultancy Energy Aspects said Gulf OPEC members would likely add less than 1 million bpd immediately, rising to about 1.5 million bpd in three to six months.

OPEC and other producing countries including Russian Federation have cut oil output by 1.8 million barrels per day (bpd) since January 2017 in an effort to boost the market. However, Reuters sources said the two sides are looking at raising production by 1 million bpd.

Before the U.S. withdrawal from the Iran nuclear deal, the Saudi position was that the cuts would remain in place until the end of this year, as planned, even if OPEC were to overtighten the market.

The oil price has risen steadily over the past year, with Brent crude establishing itself above $70 for the first time in years last month - some 30 percent higher than at the same time in 2017.

On Wednesday, the Energy Information Administration will report weekly US crude production and stockpile data.

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