Oil jumped on Thursday, June 7, on concerns about a plunge in exports from Venezuela, although surging U.S. production kept gains in check.
Brent crude futures LCOc1 were up 85 cents at $76.21 a barrel by 1222 GMT, while U.S. West Texas Intermediate (WTI) crude CLc1 rose 58 cents to $65.31 a barrel.
Venezuela, which faces the threat of U.S. sanctions and is in the midst of an economic crisis, is nearly a month behind delivering crude to customers from its main oil export terminals, according to shipping data, and chronic delays and production declines could breach state-run PDVSA’s supply contracts if backlogs are not cleared soon.
Tankers waiting to load more than 24 million barrels of crude, almost as much as state producer PDVSA shipped in April, are sitting off the OPEC member’s main oil port, according to shipping data.
“Troubles over supply from Venezuela come at a time when OPEC is considering easing supply cuts which have been in place since 2017 and were implemented to support the price,” London Capital Group head of research Jasper Lawler said.
“The big question for oil is whether or not OPEC decides to ease the production cuts, with the meeting still some two weeks away, oil traders could be in for an increased bout of volatility.”
Venezuela’s supply problems have materialized while the Organization of the Petroleum Exporting Countries has voluntarily cut output since 2017 to help bring global output in line with demand.
The group, led by Saudi Arabia, has complied with its commitment to limit production, but not every member has cut voluntarily. Aside from Venezuela, Angola has also seen output decline rapidly from its aging fields.
The group meets in Vienna, together with top non-OPEC producer Russia, on June 22 to discuss its supply policy.
OPEC-member Iraq said on Wednesday a production increase was not on the table.
This followed an unofficial request from the United States asking OPEC’s effective leader Saudi Arabia to boost output.
Outside OPEC, however, crude output continues to rise, especially in the United States, which is fast closing in on Russia’s position as the world’s largest producer, as supply approaches 11 million bpd.
U.S. crude inventories rose by 2.1 million barrels in the week to June 1, to 436.6 million barrels, the Energy Information Administration said on Wednesday, Reuters reports.
Surging U.S. production has pushed the discount of WTI futures to Brent to more than $10 a barrel CL-LCO1=R.
