Oil slipped after Russia was said to propose that OPEC and other producers in a global alliance reverse the supply cuts they’ve been making since early last year.
Futures in New York dropped as much as 1.3 percent after Russia, which has already started increasing output, was said to suggest that OPEC and its allies be allowed to return production to October 2016 levels within three months, although not all nations would be able to do so. The International Energy Agency said Saudi Arabia and other Gulf producers may need to boost supply to offset potential losses from Venezuela and Iran.
Oil has retreated from the highs of May after Saudi Arabia and Russia signaled they may increase output later this year to counter supply losses from other producers, while U.S. President Donald Trump is also pressuring them to temper crude prices. Investors are looking for signs of whether OPEC will reach a consensus on boosting production, with the group set for a fractious meeting in Vienna next week.
“While some members appear to be against the idea, we believe that we will see a gradual lifting of cuts,” said Warren Patterson, a commodities strategist at ING Bank NV in Amsterdam.
West Texas Intermediate crude for July delivery dropped as much as 84 cents to $65.52 a barrel on the New York Mercantile Exchange, and traded at $65.96 as of 8:27 a.m. local time. The contract climbed 26 cents to $66.36 on Tuesday. Total volume traded Wednesday was about 14 percent below the 100-day average.
Brent futures for August settlement declined as much as 62 cents to $75.26 on the London-based ICE Futures Europe exchange, after sliding 0.8 percent on Tuesday. The global benchmark crude traded at a $9.87 premium to WTI for the same month.
Investors are searching for clues on what next week’s OPEC meeting could yield. Russia plans to propose the producers proportionally share out a 1.8 million-barrel-a-day increase to their output limit starting as soon as July, said a person with knowledge of the matter. That would effectively end the cuts for any country that has the ability to pump more crude, going further than the previous suggestion for boosting output.
Given the backing of the two largest producers participating in the accord, a supply increase “ looks inevitable,” Citigroup Inc. analyst Ed Morse said in a report on Tuesday.
Other oil-market news:
President Trump tweeted about oil prices again on Wednesday, saying: “Oil prices are too high, OPEC is at it again. Not good!” On Tuesday, OPEC emphasized the deep uncertainty over the strength of demand later this year, saying there’s a “wide forecast range” for how much crude the organization will need to pump. A Bloomberg survey showed OPEC will probably overcome internal disputes to agree on a production increase next week. OPEC’s compliance with crude-output curbs slipped to 162 percent in May from 171 percent the previous month, according to Bloomberg calculations from the group’s secondary-source data published Tuesday. In the U.S., crude stockpiles increased by 833,000 barrels last week, the American Petroleum Institute was said to report. That compares with estimates for a decline of about 1.25 million barrels by analysts in a Bloomberg survey.