Oil prices up with OPEC cuts, supply risks

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Global benchmark Brent crude jumped over 1 percent to $71.56 per barrel while U.S. West Texas Intermediate (WTI) crude futures were up as much as 1.4 percent at $64.45 per barrel. Indicating that an ongoing price hike could prompt OPEC to promote a supply glut, an analyst at Price Future Group in Chicago, Phil Flynn said, "Now there is a suggestion that OPEC may surprise us and raise production pre-emptively if we get a price spike".

U.S. West Texas Intermediate crude at Midland yesterday traded at the biggest discount to futures in nearly four months after Phillips 66 closed a unit for maintenance at its Borger, Texas refinery, adding to a backlog of barrels as production climbs.

Kirill Dmitriev, the Russian sovereign wealth fund chief who engineered the cooperation with OPEC, indicated this week that he wanted Moscow to pump more, although the Saudis, who virtually run OPEC, would like the curbs to remain. This was more than enough to offset the crude oil build.

With this decline in production, which according to official records is due to a natural decline from the depletion of some wells and the lack of investment in the prospecting, surveying and exploration segments in the last ten years, Nigeria has moved ahead and consolidated its position as the main producer in Africa.

However, President Vladimir Putin seemingly softened that stance.

Opec+ members will meet in June to discuss oil policy.

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Current oil demand stands around 100 million bpd.

In 2018 OPEC+ made a decision to increase output at its mid-year meeting, only to return to production cuts in 2019.

In its monthly oil market report, OPEC estimates demand for its crude to average 30.30 million barrels per day in 2019, a fall of 1.05 million bpd on the year, signifying that oil inventories are going to decline sharply, pointing to a very tight market. Saudi Arabia is set on maintaining the production cuts into the second half of 2019, while Russian Federation refuses to commit to an extension.

"An increase is on the table, yes, if prices went to $80 and higher", this OPEC source said.

USA crude oil production remained at a record 12.2 million bpd, making the United States the world's biggest oil producer ahead of Russian Federation and Saudi Arabia.

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