Oil prices fell slightly on Friday, but boosted by plummeting Venezuelan production, strong global demand and likely US sanctions against Iran, Brent crude was on track for its sixth straight week of gains. Statoil photo by Ole Jørgen Bratland.
Oil prices in overbought territory: Analyst
Oil prices fell slightly in trading on Friday. Despite the losses, Brent is on track for posting its sixth straight week of gains, due to falling production in Venezuela, strong global demand and the threat of renewed US sanctions against Iran crude exports.
By 2 p.m., EDT, benchmark Brent was down 80 cents to $78.50/barrel and US West Texas Intermediate slipped 10 cents to $71.39. The Canadian Crude Index dipped by 24 cents to $50.891.
On Thursday Brent broke $80/barrel for the first time since November 2014 and is now 20 per cent higher than the beginning of the year.
“Oil prices are in overbought territory, which has prompted some profit taking in today’s trading session ahead of the weekend,” Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics told Reuters.
On Sunday, Venezuelans will head to the polls. Should current President Nicolas Maduro be re-elected for a six-year term, the US may impose more US sanctions on the embattled South American country.
The opposition party has largely boycotted the campaign and two of Maduro’s most popular opponents have been banned from running in the election. The US, the European Union and major Latin American country have criticized the process.
Should the US impose more sanctions, Venezuelan oil production could be further hampered. The industry is suffering from a lack of maintenance and state-owned oil company PDVSA has been unable to pay its bills. As well, PDVSA opted to close its Curaçao refinery after ConocoPhillips seized its oil in an effort to collect a $2 billion court award.
Barclays analysts say Venezuelan output could drop below 1 million barrels per day (b/d). In April, the OPEC nation produced about 1.4 million b/d.
After India voiced frustrations about rising oil prices, Saudi Arabia’s Energy Minister Khalid al-Falih called India’s Petroleum Minister to assure him that supporting economic growth is “one of the kingdom’s key goals”, according to Reuters.
Al-Falih vowed the kingdom would ensure the world has adequate fuel supplies.
Oil prices have risen this year as participants in the OPEC supply cut agreement have strongly complied with their pledges, and in many cases, bettered their output cut obligations. Also, the Trump administration’s decision to opt out of the Iran sanction relief program, which US investment bank Jefferies says could remove over 1 million b/d from the market, has also boosted oil prices.
On Friday, Baker Hughes reported the number of US oil rigs held steady at 844, after six straight weeks of increases.
Despite the optimism, BP’s Chief Executive Bob Dudley told Reuters he sees the price of oil falling to between $50 and $65/barrel due to rising US shale production and OPEC’s capacity to increase its output.