Oil prices dip on speculation of OPEC lifting output among members

Oil prices experienced a dip in value of around US$1 yesterday, based on building speculation that OPEC could advise its members to lift production to make up for falling output from Venezuela and Iran.

Brent crude came down below the $80 a barrel mark to settle at $78.79 (-1.27%), while US West Texas Intermediate futures fell to $70.71 a barrel (-1.57%) at the close of play.

Iran has been hit by the US decision to withdraw from the nuclear containment deal which saw sanctions on Iranian oil re-imposed, while Venezuela’s oil output has fallen to about 1.4 million barrels per day (bpd) as its economic crisis grows.

OPEC and other major oil producers will meet in Vienna next month to discuss the state of play in the industry, with expectations building that the agency could decide to lift production amongst its members to cover the Iranian and Venezuelan shortfall.

OPEC has previously led an effort to curb combined output to around 1.8 million bpd to boost prices and clear a supply glut, which succeeded in pushing prices above $80 a barrel for the first time since November 2014.

“We still believe that a production increase will still be forthcoming that will become official at next month’s OPEC meeting,” said Jim Ritterbusch, president of Ritterbusch and Associates in a note.

“In the meantime, even the slightest suggestion of such a decision, especially from the Saudis, could force a 1-2% price selloff as seen this morning.”