Oil prices drop on potential increase in Opec output

SEOUL: Oil prices fell on Thursday, pulled down by expectations that Opec members could step up production in the face of worries over supply from both Venezuela and Iran.

International benchmark Brent futures were down 15 cents, or 0.19 per cent, at $ 79.65 per barrel at 0103 GMT.

US West Texas Intermediate (WTI) crude futures were down 10 cents, or 0.14 per cent, at $ 71.74 a barrel.

The Organization of Petroleum Exporting Countries (Opec) may decide to increase oil output to make up reduced supply from Iran and Venezuela in response to concerns from Washington over a rally in oil prices, Opec and oil industry sources told Reuters.

Supply concerns in Iran and Venezuela following new US sanctions had pushed both Brent and WTI to multi-year highs, with Brent breaking through a $ 80 threshold last week for the first time since November 2014.

“The chat is still that Opec will do something at its June meeting in reaction to the looming prospect of a fall in crude production and exports from both Iran and Venezuela as the year progresses,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.

Opec and some non-Opec major oil producers are scheduled to meet in Vienna on June 22. The group previously agreed to curb their output by about 1.8 million barrels per day to boost oil prices and clear a supply glut.

“Any signs that the group may be heading towards an early exit from the production cut agreement would weigh on prices,” ANZ bank said in a note.

A surprise increase in US weekly crude stockpiles also kept a lid on oil prices. Commercial US crude inventories rose <C-STK-T-EIA> by 5.8 million barrels in the week to May 18, beating analyst expectations for a decrease of 1.6 million barrels, the Energy Information Administration (EIA) said on Wednesday.

Meanwhile, Libya, which is an Opec member, cut its oil production by about 120,000 barrels per day as unusually hot weather prompted power problems, an official from the National Oil Corp said on Wednesday.