Crude drops after Saudi-Russia output revival plan rattles traders

Oil prices fall as supply from top three producers set to rise

Anticipation of an increase in supply by OPEC and non-OPEC members is likely to have a moderating effect on oil prices in the coming weeks. Both the United States and European oil drops in the market as the global oil supply report increasing number of supply. The price of oil is rising due to a supply problem, even of shale oil, largely produced by the United States of America, which has also become one of the largest oil producing nations in the world in the past five years. A sell-off in emerging market currencies, not least Turkey, together with political developments in Italy and Spain also helped give gold a boost.

OPEC may decide to raise oil output as soon as June due to worries over Iranian and Venezuelan supply and after Washington raised concerns the oil rally was going too far, OPEC and oil industry sources told Reuters on Tuesday.

Oil prices inched down on Wednesday amid concerns that Saudi Arabia and Russian Federation will pump more crude in the second half of the year in response to falling global crude inventories and rising consumer prices. OPEC is raising output because it is trying to keep crude oil at a price that is more attractive to refiners. This is because the falling oil output from crisis-hit Venezuela has in reality increased the production cuts to some 2.7 million barrels per day, Russia's energy minister has said.

Crude oil storage tanks are seen from above at the Cushing oil hub, appearing to run out of space to contain a historic supply glut that has hammered prices, in Cushing, Oklahoma, March 24, 2016.

OPEC knows from experience that pushing the price too high will bring on a flood of new US drilling and the cartel will be stuck back in 2014 when prices collapsed into the $40 range.

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OPEC and non-OPEC ministers will meet on June 22 to make a final decision on easing supply curbs.

According to agency reports, Brent now commands its largest premium over USA futures in more than three years, and this implies that United States exports are rapidly becoming far more competitive globally than those from northern Europe, Russia or parts of the Middle East.

That said higher prices at the pump hurt the consumer and the government needs to weigh the interests of the oil companies (and the benefits of their investment) against rising consumer dissatisfaction. Additionally, ongoing disruptions in economically fragile OPEC member Venezuela and potential losses from fellow group member Iran because of renewed US sanctions on the Islamic Republic are likely to partially offset this higher supply, the bank said.

"The government is aware of the country's vulnerabilities to abrupt changes in the global oil situation and impending threats on the same, hence we are formulating various strategies to address those vulnerabilities to cushion the impact for our consumers", Cusi said on Monday.

The fall in prices of oil for drivers has been welcome news as it has been for companies that purchase large amounts of energy.

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