Oil prices drop as supplies increase

In terms of supply, two big variables are Venezuela and Iran.

The IEA said it expects global oil demand to grow 1.4 million bpd this year, and in 2019, and will top 100 million bpd in the fourth quarter of 2018.

On the discussion table was de-bottlenecking infrastructure to facilitate more USA crude oil coming to Asia so as to cut the dominance of the Organization of the Petroleum Exporting Countries (OPEC), which supplies about 60% of India's oil needs.

Trump sparked the latest back-and-forth on Wednesday when he renewed his attack on OPEC, saying in a tweet that oil prices are too high and blaming the cartel.

"Over time it would have happened anyway because of the cutbacks in (drilling) investment, but definitely OPEC's cut in production helped speed the reduction of the oil glut", said Phil Flynn, an oil analyst for The Price Futures Group. "The boom in United States oil and gas production gives us greater leverage against Opec", an official said.

With output in Russian Federation rising back above 11 million bpd in June and Saudi production climbing to more than 10 million bpd, supplies from all three top producers are increasing.

Citing "people briefed on the discussions", Bloomberg on Wednesday said Saudi Arabia had floated several oil output hike plans to fellow cartel members.

Oil prices eased on Thursday, dragged down by rising output, although strong demand and a drop in us fuel inventories provided the market with some support. A gallon of regular gasoline is now $2.91, up 25 percent from the year-ago level.

Since early 2017, OPEC and other oil-producing countries have agreed to reduce supply in a bid to bolster oil prices. Key producers, including Saudi Arabia and Russian Federation, have reaffirmed the deal since then.

But Matt Smith, director of research at ClipperData, said Trump himself is responsible for some of the pressure due to the decision to exit the Iran deal.

"It's confusing why the president would come out with a statement like this now", Smith said.

President Trump's most recent OPEC-related tweet comes just a week ahead of the OPEC and partners' meeting in Vienna, during which they will discuss reversing some of the cuts. "The real catalyst for the recent rise in prices is the sanctions on Iran".

US crude stocks fell more than expected last week, while gasoline and distillate inventories dropped, the Energy Information Administration said on Wednesday.

This could lead to a supply gap in crude late next year if OPEC can't make up for lost production, the IEA said in its monthly report Wednesday.

The IEA noted meanwhile that only Saudi Arabia and OPEC's other Middle East members have the ability to ramp up production swiftly to alleviate any supply shortages in the market.

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